The largest cryptocurrency exchange by volume traded, Binance has enlisted at BBVA, Spain’s third largest bank, and is looking to improve customer protection by isolating assets from the disruptions that may occur on the trading platform.
The custody arrangement separates trading activities from funds that support the transaction through US Treasury parking client assets held by BBVA. Binance then accepts the Treasury as the margin of transactions, and FT quotes people familiar with the process. If Binance fails, the funds will remain safe in the Ministry of Finance, which is under the control of the BBVA.
This transaction distances exchanges from previous models that hold user funds within the company. This shift follows pressure on crypto exchanges to isolate custody from transactions, particularly after the collapse of FTX in 2022. Another measure adopted is a encryption method that proves that the customer’s funds are in their wallets.
Last year, Binance, which paid a $4.3 billion penalty to US regulators for anti-money laundering obstacles, allowed clients to use third-party custodians such as Sygnum and Flowbank.
BBVA runs deep in cryptography. Just this year, it deployed crypto trading and custody services through the mobile app, advised private clients to allocate up to 7% portfolio to Bitcoin
and ether (ETH).