Binance is adding cold-custody options to its institutional trading services in response to the problem facing centralized cryptocurrency exchanges
The official launch of Binance Mirror, an off-exchange settlement solution that enables institutional investors to invest and trade via cold custody, was announced by Binance on January 16.
The recently released Mirror service mirrors cold-storage assets using 1:1 collateral held on a Binance account and is based on Binance Custody, a regulated institutional digital asset custodian.
Their assets remain secure in their segregated cold wallet for as long as their Mirror position remains open on the Binance Exchange, which can be settled at any time, according to Binance, which emphasized that the new solution enables more security by allowing traders to access the exchange ecosystem without having to post collateral directly on the platform.
Binance Custody is a type of custodian platform that offers cold storage options and protects assets from external interference, internal theft, physical damage, and loss. Early last year, Binance Custody acquired cold-wallet insurance in Lithuania to operate an institutional-grade digital asset custody business. The Mirror represents more than 60% of the assets stored in Binance Custody.
"We introduced this service offering last year and tested it on our institutional clients". According to a spokeswoman for Binance, the company has been inspired to publicly announce and sell it by positive customer feedback.
Whether Binance intends to offer comparable cold custody services to regular investors is currently unknown. The announcement comes soon after Binance saw its liquidity drastically decline in late 2022 when the company saw a loss of several billion dollars worth of digital assets.
The crisis among Centralized exchanges caused by the demise of FTX is largely to blame for the drop in liquidity, as investors flocked to self-custody instead of keeping their assets on centralized platforms. In light of the expanding trend of self-custody, Binance CEO Changpeng Zhao acknowledged that centralized exchanges may one day be unnecessary.
