Binance to Keep Customer Assets on Independent Custodians

Binance has bowed to pressure from customers who want to hold their assets with an independent custodian, highlighting traders' growing unease over the safety of the world's largest cryptocurrency exchange since it was fined by US authorities last year.

The exchange has begun to allow some larger traders to keep their assets at independent banks, including Switzerland's Sygnum Bank and Flow Bank, according to three people with knowledge of the arrangements. Previously, Binance clients could only hold their assets either on the exchange or through custodian Ceffu, which on its website says it is the "only institutional custody partner of the Binance Exchange". US regulators last year described Ceffu as a "mysterious Binance-related entity".

Binance said it "started exploring and developing a banking triparty solution almost two years ago, well before counterparty risk became prominent", referring to an arrangement between Binance, its customers and a bank custodian.

Traders said the risk of leaving their money on an exchange had risen after the collapse of Binance's rival FTX in 2022, which has left the money of thousands of investors trapped in that company's bankruptcy proceedings.

US authorities' recent crackdown on Binance is also a concern. Last year the US Treasury and Department of Justice jointly levied a record $4.3bn fine on Binance after the exchange pleaded guilty to criminal charges related to money laundering and breaching international financial sanctions.

The Securities and Exchange Commission has charged Binance with 13 securities laws violations and accused it of engaging in "an extensive web of deception and conflicts of interest". Binance is contesting the charges.

Ceffu said that its corporate structure is independent of Binance. It added that its custody business is built "with segregated account and wallet systems separate from any partner exchange, including Binance".

In spite of the US crackdown, traders say they are reluctant to cease trading on Binance altogether as it remains the world's most liquid crypto exchange.

Even so, its market share has dropped to 30 per cent of volume traded on exchanges compared with 55 per cent a year ago, according to CCData.

(Source: Financial Times)