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Edited by Kitu11 at 22-12-2023 01:14 PM
Binance, in collaboration with banking partners, has successfully executed the world's first tripartite agreement for cryptocurrencies. This enables institutional investors to have their collateral and over-the-counter (OTC) trading collateral held by a third-party banking partner. Binance is currently the only cryptocurrency exchange providing such a solution.
What is a Triparty Agreement?
A triparty agreement refers to a business transaction involving three independent parties. In this context, it involves three parties agreeing to jointly hold and manage a financial asset. Participants include:
- Borrower: The client in need of funds
- Lender: The bank providing funds to the borrower
- Custodian: The third party assisting in holding the financial asset
The borrower entrusts the financial asset to the custodian for safekeeping. The custodian is responsible for managing the financial asset and providing reports to both the borrower and the lender.
Replicating Traditional Financial Models in the Crypto Space
Binance states that this arrangement directly addresses counterparty risk, a primary concern for institutional investors today. It replicates common frameworks in traditional financial markets, enabling investors to allocate crypto assets based on their risk tolerance. Collateral can take the form of legal equivalents, such as U.S. Treasury bonds, or even cryptocurrencies.
Catherine Chen, Binance VIP and Head of Institutions, commented, "Counterparty risk has always been a concern for institutional investors. We have developed a solution that mimics the ways of traditional financial markets, ensuring our institutional clients can optimize their collateral and cryptocurrency investments."
Binance indicates ongoing close discussions with multiple banking partners and institutional investors. Richard Teng, Binance's newly appointed CEO, emphasized in an interview with Fortune that he plans to leverage Binance's regulatory advantages to lead the company's transition from a tech startup to a traditional financial entity. |
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Post time 7-12-2023 21:44:21