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Binance Engages in Discussions to Enable Traders to Secure Collateral at a Bank, Reports Bloomberg

According to Bloomberg News, Binance, the largest cryptocurrency exchange globally, is currently

engaged in discussions regarding a proposal that would allow certain institutional clients to store their

trading collateral at a bank, rather than with the crypto platform itself.

Bloomberg reported on Tuesday that Binance has held discussions with its professional clients regarding

a potential arrangement that would enable them to utilize bank deposits as collateral for margin trading

in both spot and derivatives markets. Four individuals familiar with the matter provided this information.

Bloomberg’s sources have mentioned Swiss-based FlowBank and Liechtenstein-based Bank Frick as potential intermediaries in the discussions with Binance. These two banks are being considered as possible partners to facilitate the proposed arrangement.

According to Bloomberg’s report, one version of the proposal being discussed by Binance involves

locking up clients’ cash at the bank through a tri-party agreement. In this scenario, Binance would lend stablecoins to the clients, which would serve as collateral for margin trading.

Binance Focus Shines on Exchanges

US regulators have intensified their scrutiny of crypto exchanges, particularly due to their integration of various services such as custody, brokerage, and lending. These multifaceted roles played by exchanges have drawn increased attention from regulatory authorities.

In his testimony before the US House Financial Services Committee last month, SEC Chair Gary Gensler highlighted the potential risks and conflicts of interest associated with the amalgamation of different functions within crypto intermediaries.

The aftermath of the FTX crypto exchange incident did little to alleviate concerns regarding potential losses within the industry.

After experiencing a collapse, FTX filed for bankruptcy towards the end of last year, leading to the resignation of its former CEO, Sam Bankman-Fried.

Bankman-Fried is currently confronting criminal and civil charges in the United States. These charges include allegations of conspiracy to commit money laundering, wire fraud, securities fraud, and violations related to campaign finance.

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