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Binance launches new service to avoid repeating FTX failure

Crypto exchange Binance has launched a service designed to reassure institutional investors. The solution provides for OTC collateral for leveraged positions.

Binance Custody, the custody service of the largest crypto exchange Binance, has announced the launch of a new Binance Mirror service. The exchange's solution for institutional investors will support off-exchange collateral for leveraged positions.

Binance bets on institutionals
The new cold storage service is expected to reassure the largest clients of the exchange and ensure the security of their collateral in leveraged investments, thereby protecting the crypto platform from the risks of an FTX-style fiasco.

The collateral will be placed on a cold wallet, but will be displayed in the user's account on the platform. The Binance Mirror tool “mirrors” such assets in a 1:1 ratio, maintaining an open position on the exchange. After closing the position, the user regains control over his money.

Thus, large clients will have access to various crypto exchange products without depositing funds directly on the platform itself.

Such storage protects money more reliably. In addition, the exchange will not be able to freeze the client's funds even in the event of serious liquidity problems.

Focus on risks - The official launch of the tool took place just now, but the company has been working on it for a long time and testing its functionality. In the fourth quarter of 2022, institutional investors used the Mirror tool 67% more often. As noted by Binance Custody, over 60% of all assets held in this unit are currently represented by Mirror accounts.

The management of the exchange believes that institutionals thus demonstrate a growing confidence in OTC custody solutions. Since the collapse of FTX due to a liquidity crisis, large clients are increasingly demanding more conscious and responsible risk management from the exchange. Binance is ready to meet them, working on the issue of exchange risk diversification and trying to assure users that their assets are safe.

This approach is already making itself felt. According to the exchange, in the 4th quarter, the number of new customers of its institutional division increased by 17.4% compared to the previous quarter.

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