Fintech giant Binance collaborates with BBVA, Spain's second-largest bank, to secure deposits from cryptocurrency traders in government securities.
In a significant move for the crypto industry, Binance, the world's largest cryptocurrency exchange, has partnered with Banco Bilbao Vizcaya Argentaria (BBVA), Spain's second-largest bank by assets, to provide a more secure and regulated custody solution for its clients.
This partnership marks a milestone in the maturation of the crypto market’s infrastructure, as it introduces a traditional finance (TradFi)-style, off-exchange custody model that separates asset storage from trading activities. Under this arrangement, BBVA, a major Spanish bank, holds customer funds in US Treasuries and directly safeguards crypto assets off the Binance platform, while Binance uses these Treasuries as margin for trades without directly handling or commingling client funds.
The move is a response to the growing demand for independent custody due to the collapse of FTX in 2022, which exposed key risks in the crypto industry, such as lack of asset segregation and poor fund management. By having a credible, regulated bank act as an independent custodian, the partnership addresses these concerns by reducing counterparty risk, enhancing investor protection and trust, and moving crypto custody practices closer to TradFi standards.
Reducing counterparty risk is a key benefit of this arrangement. By ensuring customer assets are safeguarded by an established traditional bank rather than by the exchange alone, the partnership significantly reduces exposure to exchange operational risks. Holding client collateral in highly liquid, low-risk instruments such as U.S. Treasuries further strengthens trust in trading venues.
The partnership also facilitates clearer regulatory compliance, as BBVA is authorized to offer retail crypto services and operates under established financial regulations. This helps bridge regulatory gaps that traditional banks previously hesitated to cross due to legal uncertainties.
The deal potentially places one of Spain's biggest banks at the center of Binance's custody network, with BBVA holding about €772 billion in assets (US$835 billion). Over the past year, BBVA has deepened its crypto footprint, becoming the first traditional bank in Spain to offer Bitcoin and Ethereum trading and custody to retail clients.
Pauline Shangett, chief strategy officer at non-custodial crypto exchange ChangeNOW, stated that this move is one of the clearest signs yet that crypto market infrastructure is maturing to TradFi standards. Giorgia Pellizzari, head of custody at Hex Trust, echoed this sentiment, stating that the move signals market maturity in the crypto industry.
Han Qin, CEO of tokenized equity platform Jarsy, noted that a shift in how crypto platforms manage risk and trust is underway. This shift is further evidenced by BBVA's move with Binance, which shows big banks aren't just watching crypto anymore, they're looking for ways to plug in where TradFi safety meets digital asset growth.
In conclusion, the Binance-BBVA custody partnership is a significant step towards improving trust in the crypto market. By introducing a level of segregation and safety in crypto trading margins that historically lacked in the industry, the partnership potentially accelerates mainstream adoption and stability in the crypto ecosystem.
- Binance, the world's largest cryptocurrency exchange, has partnered with BBVA, Spain's second-largest bank by assets, to provide a more secure and regulated custody solution for its clients.
- This partnership introduces a TradFi-style, off-exchange custody model that separates asset storage from trading activities.
- Under this arrangement, BBVA holds customer funds in US Treasuries and directly safeguards crypto assets off the Binance platform.
- The move is a response to the growing demand for independent custody due to the collapse of FTX in 2022, which exposed key risks in the crypto industry.
- By having a credible, regulated bank act as an independent custodian, the partnership addresses concerns in the crypto industry by reducing counterparty risk, enhancing investor protection and trust, and moving crypto custody practices closer to TradFi standards.
- The deal potentially places one of Spain's biggest banks at the center of Binance's custody network, with BBVA holding about €772 billion in assets (US$835 billion).
- Giorgia Pellizzari, head of custody at Hex Trust, echoed this sentiment, stating that the move signals market maturity in the crypto industry, with a shift in how crypto platforms manage risk and trust underway.
