Amid the centralized cryptocurrency exchange (CEX) crisis, cryptocurrency exchange Binance is moving to enhance its institutional trading services with cold custody opportunities.
Binance announced on January 16 the official launch of Binance Mirror, an off-exchange settlement solution that allows institutional investors to invest and trade using cold custody.
The recently launched Mirror service builds on Binance Custody, a custodian of regulated institutional digital assets, by mirroring cold storage assets through a 1:1 collateral on the Binance account.
Binance emphasized that the new solution enables more security, allowing traders to access the exchange ecosystem without having to post collateral directly on the platform, stating:
“Your assets remain safe in your segregated cold wallet as long as your Mirror position remains open on Binance Exchange, which can be liquidated at any time.”
Launched in 2021, Binance Custody is a custody platform with its own cold storage solutions, covering assets protected against physical loss, damage, theft, or insider collusion. In March 2022, Binance Custody secured cold wallet insurance in Lithuania to operate an institutional-grade digital asset custody solution. Mirror is a new product of Binance Custody, which represents more than 60% of all assets secured in Binance Custody.
“We built Binance Mirror last year and have been testing it with our institutional users. User feedback has been positive and we are pleased to announce and officially trade it now,” a Binance spokesperson told Cointelegraph.
It appears that it is unclear if Binance plans to provide similar cold custody 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 worth of cryptocurrency leaving the platform by the end of 2022. The liquidity decline is largely attributed to the CEX crisis fueled by the collapse of the FTX cryptocurrency exchange, with investors flocking to self-custody instead of storing their assets on a centralized platform.
Amid the growing self-custody trend and CEX crisis, Binance CEO Changpeng Zhao has admitted that centralized exchanges will no longer be necessary one day. In November, Binance’s venture capital arm also invested in Belgian hardware wallet firm Ngrave.
