The world’s largest crypto exchange is examining a proposal to offer its clients the option to secure their collateral outside the crypto exchange.
The setup would let institutions use bank deposits for margin trading in spot and derivatives, according to a May 30 report from Bloomberg, citing four people with knowledge of the matter.
Although the setup is yet to be finalized, one version of the proposal includes locking up clients’ cash at the bank through a tri-party agreement, while Binance lends them stablecoins to serve as collateral for margin trading. Meanwhile, the cash held at the bank could be invested in money-market funds to earn interest to help compensate for the cost of borrowing from Binance.
The people also disclosed that Swiss-based FlowBank and Liechtenstein-based Bank Frick are being considered as potential intermediaries that would facilitate the service. Both financial institutions did not confirm the arrangement, with Bank Frick citing banking secrecy laws and FlowBank stating that its license does not cover crypto trading.
Elsewhere, Binance has run into trouble losing access to key banking partners and facing increased scrutiny from regulators. In Australia, Bitcoin was trading at a 20% discount on Binance compared to other exchanges on Tuesday, as users rushed to withdraw Australian dollars to their bank accounts through the PayID service before June 1, when the service will be cut off for users.
Binance was forced to suspend AUD fiat services earlier this month after its payments provider Cuscal terminated its relationship with the crypto exchange. On the same day, major Australian banking firm Westpac banned customers from transacting with Binance.