What to Know
- Binance has partnered with BBVA as a third-party custodian to allow users to keep assets off the exchange.
- Users can now park funds in U.S. Treasuries held by BBVA, which Binance accepts as collateral for trading.
- This move aims to boost fund security, win back trust, and meet growing institutional demand.
Binance has partnered with BBVA to allow users to maintain their crypto assets off the exchange. The move allows users to hold assets outside of the platform and utilize them as margin for trading, thereby protecting their funds from exchange-related risks.
The arrangement essentially “parks” client funds in U.S. Treasury securities that BBVA owns and that Binance uses as security for margin trades. BBVA keeps the assets safe in case Binance faces technical problems or goes bankrupt. The partnership between Binance and BBVA is a big step toward keeping users’ funds safer. This separation between custody and trading addresses investors’ growing worries about the safety of their money after the FTX collapse in 2022.
BBVA’s Strategic Push
BBVA just launched Bitcoin and Ether trading and custody services for retail customers via its mobile app in compliance with EU MiCA regulations. Additionally, BBVA’s private banking branch now advises clients to allocate up to 7% of their portfolios to cryptocurrency, which is quite uncommon for a traditional bank to do.
Additionally, BBVA’s involvement in this transaction demonstrates a greater commitment to positioning itself as a bridge connecting traditional finance and cryptocurrency. The bank’s role as a custodian in the Binance partnership may help it differentiate itself from other institutions that are still hesitant to deal with cryptocurrency. The bank has been gradually expanding its blockchain and tokenization projects throughout Latin America and Europe.
Binance Regulatory Challenges
Earlier today, Paxos reached a $48.5 million settlement with the New York Department of Financial Services over compliance lapses tied to its former BUSD partnership with Binance, agreeing to halt BUSD distribution in New York and bolster oversight. Just two days earlier, CZ moved to dismiss a $1.8 billion clawback lawsuit from FTX’s bankruptcy estate, arguing U.S. courts lack jurisdiction. Together, these developments underscore why Binance is pushing visible measures like BBVA’s off-exchange custody to show regulators and users that safeguards are being reinforced.
Earlier this year, Binance paid $4.3 billion to the U.S. government to settle charges of breaking anti-money laundering and sanctions laws. Founder Changpeng Zhao was sentenced to four months in prison. People see the BBVA partnership as a smart way to rebuild trust and reassure users that their money is safe.
Early last year, the exchange bowed to pressure from customers, allowing them to hold assets with independent custodians, including Switzerland’s Sygnum and FlowBank, as a way of mitigating counterparty risk. Prior to that, Binance’s clients could only hold assets either directly on the exchange or through custodian Ceffu, which US officials had described as a “mysterious Binance-related entity”.
What’s Next for Binance and BBVA?
- Guide for Others: Other exchanges may follow Binance’s lead and form similar partnerships to maintain trust.
- Asset Expansion: BBVA can now expand its solutions to other exchanges or institutional clients.
- User Adoption: Traders can now shift to off-exchange custody if it doesn’t hamper liquidity or trading speed.
Final Thoughts: Binance-BBVA Deal Boosts Web3 Trust
Binance’s agreement with BBVA separates asset storage from exchange operations, making it a big step toward rebuilding trust in Web3. Using US Treasury holdings as backup provides users with both protection and utility, allowing them to continue trading without risking their money on the exchange.
As regulations tighten and institutions seek safer frameworks, this approach may become the new standard for cryptocurrency custodian services. However, its success will be determined by how effectively it works, how easy it is for users to adopt, and whether other organizations in the same industry follow suit with security-focused policies.
Also Read: Animoca and Standard Chartered Form Joint Ventures for Hong Kong Stablecoin License
