In a bid to rebuild investor trust in centralised cryptocurrency exchanges, Binance has joined hands with BBVA, one of Spain’s largest banks, to offer independent custody services for customer assets. The move marks a significant shift towards integrating traditional banking safeguards in the crypto industry, following widespread scepticism after the collapse of major platforms like FTX.
Crypto Custody Strengthened by Traditional Banking
According to the Financial Times, Binance’s partnership with BBVA allows users to store their funds through the bank, with the assets reportedly held in US Treasurys. Binance accepts these assets as collateral for trading on its platform, reducing counterparty risk and offering greater transparency. This arrangement follows similar custody collaborations Binance has made with Swiss financial institutions Sygnum and FlowBank.
By involving regulated banks in the custody process, Binance aims to provide additional layers of protection for users, potentially encouraging institutional investors to re-enter the crypto space. The development comes at a time when confidence in centralised platforms remains shaky.
FTX Fallout and the Push for Safety
The move reflects Binance’s response to the ongoing impact of the FTX collapse in 2022, which left countless users unable to access their funds. FTX’s downfall led to increased global scrutiny and highlighted the vulnerabilities in self-custody practices among exchanges. For instance, Genesis Trading alone lost approximately $175 million when FTX froze assets.
Binance’s new custody strategy, which places customer funds under the oversight of respected financial institutions, could be a key step in distancing itself from the regulatory troubles that have plagued both it and others in the industry.
New Fiat Conversion Support for Europe
In a separate but related development, Binance launched a service on Thursday allowing users in the European Economic Area and the United Kingdom to convert crypto to fiat and withdraw directly to Mastercard. The service promises near-real-time access to funds, streamlining the off-ramping process for European users.
This enhanced functionality is expected to appeal to everyday investors and businesses alike, giving users quicker and more reliable access to their funds in traditional currency.
BBVA Adds Credibility Amid Limited Banking Partners
Although Binance has partnered with only a few banks for independent custody, sources told the Financial Times that BBVA stands out due to its strong brand reputation. This could help alleviate fears among cautious investors and demonstrate Binance’s commitment to responsible asset management.
While Binance has not officially confirmed full details of the BBVA arrangement, the company acknowledged the FT’s inquiry about the partnership.
WazirX Incident Highlights Industry-Wide Risks
Investor concerns have recently intensified after Indian crypto exchange WazirX froze withdrawals for its 16 million users following a major security breach. The incident reignited memories of FTX and underscored the importance of reliable fund custody.
WazirX had previously maintained a strong affiliation with Binance, leading some users to expect assistance. However, Binance distanced itself, stating that WazirX must take accountability for user losses. Binance called the attempt to shift responsibility “a disappointing deflection tactic” and reiterated the need for exchanges to prioritise the security of user assets.
A New Chapter for Centralised Exchanges
Binance’s push for regulated custody solutions could mark a turning point in how centralised exchanges operate. As regulatory scrutiny deepens and user expectations evolve, partnerships with credible banking institutions may become the norm rather than the exception.
By combining traditional finance’s reliability with the speed and innovation of crypto, Binance appears to be positioning itself as a safer option for investors navigating a volatile market landscape.
