Binance taps Banco Bilbao Vizcaya Argentaria (BBVA), Spain’s second largest bank, to hold client collateral from the exchange in its most prominent custody agreement.
Through partnerships, traders can maintain collateral such as the BBVA’s US Treasury Department. Financial Times I’ll quote someone who’s familiar with this issue.
The deal would potentially place one of Spain’s biggest banks at the heart of Binance’s Custody Network. BBVA holds assets of approximately 772 billion euros (US$83.5 billion).
The arrangement with the BBVA is structured so that the funds remain in the bank rather than exchanges. Although it qualifies as a custody arrangement, certain mechanisms include the BBVA retaining client funds in the form of the US Treasury Department.
The move is due to the expansion of major global crypto exchanges as they expand the use of independent custodians to rebuild trust after the FTX collapse in 2022. In the case of Binance, it follows the $4.3 billion US penalty fallout for anti-money laundering disorders in 2023, and the conviction and short incarceration of founder Changpeng Zhao.
“This is one of the clearest indications that the infrastructure in the crypto market is maturing to Tradfi standards.” Decryption.
“Unobvious improvement” of trust
From a market structure perspective, managing trader margins in the US Treasury, held by major regulatory banks like the BBVA, “introduces a level of separation and security that crypto venues have historically lacked,” Shangett said.
“It reduces exposure to the operating risks of the exchange and brings the margins of crypto trading closer to the same protections we would expect in the traditional derivatives market,” she explained. “In an industry where counterparty explosions have erased billions overnight, that’s a non-trust improvement.”
Binance and BBVA’s move: “Maturity of the Signal Market,” said Giorgia Pellizzari, custody director at Hex Trust. Decryption. “Keeping client collateral on very liquid, low-risk devices such as the US Treasury will significantly reduce counterparty risk and strengthen trust in trading venues.”
More broadly, changes in the way crypto platforms manage risk and trust are also underway, according to Han Qin, CEO of Tokenized Equity Platform Jarsy.
“The US Treasury crypto margin parking with regulated banks is as close as it can reach this industry safety net. It doesn’t erase all the risks, but it raises the floor of trust,” Qin said. Decryption.
BBVA’s Binance move shows that “large banks are looking for ways to not only watch Crypto, but Tradfi Safety is also looking for ways to plug in where it meets digital asset growth,” Qin said.
Over the past year, BBVA has deepened its crypto footprint. Last month, following a MICA license from the country’s financial market regulator in March, it became Spain’s first traditional bank to provide Bitcoin and Ethereum trading and custody to retail clients.