Amidst the centralized cryptocurrency exchange (CEX) crisis, cryptocurrency exchange Binance is moving to improve its institutional trading services with cold holding opportunities.
On January 16, Binance announced the official launch of Binance Mirror, an over-the-counter settlement solution that enables institutional investors to invest and trade using cold custody.
The newly launched Mirror service is based on Binance Custody, a regulated institutional digital asset custodian, and involves copying cold storage assets through a 1:1 collateral in a Binance account.
Binance confirmed that the new solution enables more security, allowing traders to access the exchange system without the need to post collateral directly on the platform, stating:
“Their assets remain safe in their separate cold wallet as long as their mirror status remains open on the Binance Exchange, which can be settled at any time.”
Launched in 2021, Binance Custody is a custody platform with its own cold storage solutions, covering assets secured against physical loss, damage, theft, and insider collusion. In March 2022, Binance Custody secured a cold wallet insurance in Lithuania to operate an enterprise-grade digital asset custody solution. Mirror accounts for over 60% of all assets insured on Binance Custody.
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“We built Binance Mirror last year and tested it with our institutional users. User feedback has been positive, and we are excited to announce and now officially market it,” a Binance spokesperson told Cointelegraph.
It remains unclear whether Binance plans to offer similar cold storage services to retail investors. Binance did not immediately respond to Cointelegraph’s request for comment.
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The news comes shortly after Binance experienced a massive drop in liquidity, with several billion dollars of cryptocurrency exiting the platform in late 2022. The liquidity drop was largely attributed to the crisis between CEXs fueled by the collapse of FTX, with investors flocking to self-custody. rather than having their assets stored on a centralized platform.
Amid the growing self-custodial trend, Binance CEO Changpeng Zhao admitted that centralized exchanges may not eventually be necessary. In November, the venture capital arm of Binance invested in Belgian hardware wallet company Ngrave.