Binance partners with BBVA for secure crypto custody post-FTX scandal

Binance has entered into a partnership with BBVA, one of Spain’s largest banks, to serve as an independent custodian for customer funds, according to a report by the Financial Times citing individuals familiar with the arrangement [1]. This move is part of Binance’s broader strategy to enhance trust in centralized crypto investing, especially in the wake of major scandals such as the collapse of FTX and Binance’s own regulatory challenges [1]. The partnership allows users to custody their assets with BBVA, leveraging bank-backed collateral to offer a more secure environment for crypto holdings [1].

Binance has also collaborated with Switzerland’s Sygnum and FlowBank as independent custodians, reflecting a growing trend of traditional financial institutions stepping into the crypto space to provide more regulated and secure custody solutions [1]. The FT notes that this initiative aims to bridge the gap between institutional investors and the crypto ecosystem by offering greater transparency and security [1].

Binance’s decision to partner with BBVA is seen as a strategic move due to the bank’s strong name recognition and reputation in the European market. According to the sources cited, Binance has only partnered with a limited number of banks for custodial services, but BBVA stands out for its credibility and trustworthiness [1]. This added layer of trust is crucial in a market where user confidence has been severely shaken by incidents like the FTX collapse.

In a related development, Binance launched a new service on Aug. 7 that enables European users to convert their crypto holdings into fiat and withdraw the funds directly to Mastercard accounts with near-real-time availability. The feature is intended to facilitate smoother off-ramping of funds for users in the European Economic Area and the United Kingdom [1].

Prior to such partnerships, Binance users relied entirely on the exchange for asset storage. Entrusting customer funds to trusted banks like BBVA introduces an additional layer of security, reducing the risk of fund loss in the event of exchange insolvency or misconduct [1]. The FTX collapse, which left users unable to access their funds and resulted in losses exceeding $175 million from Genesis Trading alone, underscored the urgent need for more secure custody solutions [1].

Recent events have further heightened investor concerns, including the situation with Indian exchange WazirX, which froze withdrawals for 16 million users following a major security breach. WazirX had previously sought Binance’s assistance in covering the losses, but Binance refused, emphasizing the need for WazirX to take responsibility for the mismanagement of user funds [1].

By partnering with established banks and introducing new withdrawal services, Binance appears to be positioning itself as a more regulated and trustworthy platform in a rapidly evolving market. These steps may help the exchange regain user confidence and meet growing regulatory expectations.

Source: [1] Binance taps Spain’s BBVA to offer safer crypto custody post-FTX: FT (https://coinmarketcap.com/community/articles/6895ce1efbf0d76ec0d0a6f0/)