Binance, a leading cryptocurrency exchange, has successfully piloted the world’s first triparty agreement in the crypto space, partnering with a third-party banking institution. The initiative is designed to address concerns related to counterparty risk, offering institutional clients the option to hold collateral with a banking partner in fiat form.
This groundbreaking project enables institutional investors to engage in off-exchange trading while having their collateral safeguarded by a third-party banking custodian. Binance’s solution mirrors traditional financial frameworks, allowing institutions to fulfill risk management obligations by pledging fiat or fiat-equivalent trading collateral with banking custodians.
In a blog post, Binance emphasized that the triparty agreement permits institutional clients to secure collateral with the banking partner, utilizing assets such as Treasury Bills, providing the additional benefit of yielding assets.
Counterparty risk has emerged as a primary worry for institutional investors, especially in the aftermath of the 2022 collapses of several centralized crypto firms, including FTX. The triparty agreement is envisioned as a response to these concerns, offering a secure mechanism for institutions to optimize collateral and cryptocurrency investments.
Catherine Chen, Head of VIP and Institutional at Binance, highlighted the collaborative effort between Binance’s team of crypto experts and traditional finance professionals, emphasizing the year-long exploration of a banking triparty agreement. The aim is to provide institutional clients with a solution that aligns with traditional market practices.
Despite recent challenges, including a $4.3 billion fine imposed by the Department of Justice and the departure of CEO Changpeng “CZ” Zhao, Binance remains committed to innovation. The triparty agreement represents another step in Binance’s ongoing efforts to introduce groundbreaking solutions and maintain its position as a leader in the cryptocurrency industry.
