The Financial Times, citing two people familiar with the agreement, reported that Binance has partnered with BBVA, one of Spain’s biggest banks, to act as an independent custodian for client funds.
After incidents like the FTX collapse and Binance’s own run-ins with regulators, the agreement aims to restore confidence in centralised cryptocurrency platforms. The agreement allows Binance customers to hold assets backed by collateral held by banks with BBVA. Similar agreements have been reached with FlowBank and Sygnum in Switzerland.
According to the FT, BBVA customers’ money is held in US Treasuries. These assets are then used by Binance as trading margin on its platform, potentially reducing counterparty risk.
When contacted by Cointelegraph, Binance only stated that it has received the request for comment without providing any confirmation of the specifics.
A move in the direction of safer storage
Although Binance only has a few banking partners for independent custody, the FT was informed by sources that BBVA’s well-known brand would increase user trust.
Additionally, on Thursday, Binance unveiled a service that enables European users to instantly convert bitcoin to euros and withdraw funds straight to Mastercard accounts. The function, which aims to make cashing out easier, is available to users in the UK and the European Economic Area.
Prior to these financial alliances, Binance users stored all of their funds on the exchange. An additional degree of security is provided by using reputable banks for custody, something the cryptocurrency industry has struggled with since high-profile failures.
Many consumers suffered significant financial losses and were locked out of their accounts when FTX crashed in 2022. The risks of putting all funds under the management of one organisation are highlighted by the fact that the exchange had approximately US$175 million in investments from Genesis Trading alone.
Persistent uncertainty over financial access
After a significant security breach, the Indian exchange WazirX, which was formerly closely associated with Binance, suspended withdrawals for its 16 million users, raising concerns about frozen cash once more.
WazirX requested assistance from Binance to mitigate the losses; however, Binance contested this necessity, stating: “WazirX’s efforts to transfer responsibility represent a disheartening deflection strategy, yet this should not divert attention from the critical matter at hand: the necessity for the WazirX team to be held responsible for the user funds that were lost while under their oversight.”
