Binance will allow institutional investors to keep collateralized cryptocurrencies used for leveraged positions off the platform.
Binance said in a statement on Monday that the exchange will enable investors to provide collateral to Binance Custody, which will store assets in cold storage. Once the transaction is settled, the asset will again be accessible to users.
The feature, called Binance Mirror, could be a boon for cryptocurrency investors trading in leveraged markets, since most crypto traders must leave collateral on the exchange to trade. However, using cold storage wallets means users can continue to trade cryptocurrencies during volatile sessions without large outflows on exchanges.
Users’ assets will also be protected from on-chain hacks, whereas hot wallets are vulnerable. The November collapse of Binance rival FTX raised concerns about the cryptocurrency exchange's ability to keep user assets safe, with regulators investigating FTX's misuse of client funds.
Markus Thielen, head of research and strategy at crypto service provider Matrixport, said: “This is about building trust among institutions that their funds will remain safe. This is a positive development and shows that Binance is moving towards becoming an institution-focused The direction of crypto exchanges."
