By
Steve Muchoki
April 26th, 2024
Eligible Binance customers can now use independent custodians to keep their assets instead of holding them on the Binance exchange.
Binance has finally agreed to allow its customers to keep their crypto assets with an independent custodian, as traders lose trust in the major exchange over some of the issues it faced with authorities in the United States in 2023.
Binance Traders Worried about Risk Can Keep Assets Elsewhere
According to a few people familiar with the matter, as referenced by a Financial Times report, large traders can now hold their assets at independent banks. Eligible customers can move their funds to Sygnum and Flow Banks, both Swiss banking institutions. Clients could only hold their funds on the Binance exchange itself or through Ceffu.
Traders now generally believe that leaving their money on an exchange had become a little too risky after the FTX collapse in 2022. Stakeholders say that funds are safer at independent custodians because they have more regulatory oversight, compared to exchanges.
Binance said it has been developing a triparty solution with banks for more than two years now. According to the exchange, this development began “well before counterparty risk became prominent”. However, the exchange did not specify what banks it was considering.
Binance and Ceffu
Last year, Ceffu was involved in allegations of misappropriation levied against Binance by the United States Securities and Exchange Commission (SEC). The custodian initially launched in December 2021 as Binance Custody and later rebranded to Ceffu, a play on the SAFU acronym, which means Secure Asset Fund for Users). Unfortunately, the SEC filed last year that Binance.US using Ceffu could constitute a breach of a deal that required the exchange to exclusively use local staff or third-party US providers to handle funds. This specifically meant that Binance, founder Changpeng Zhao, or any other non-US entity should not be able to access Binance.US funds.
Although Binance.US said in a September filing that Ceffu only holds and does not control customer funds, Ceffu later said it rejects the SEC’s assertion that it offers Binance.US wallet custody software and support services. In the same month, a Ceffu spokesperson told CoinDesk that “Ceffu is not a Binance entity”, adding that it is a “fully independent third-party technology service provider”.
Regulatory Issues
US authorities cracked down on Binance last year, accusing the world’s largest crypto exchange of misappropriation. Last November, Binance was in talks to pay the US Justice Department over $4 billion in fines. By December, the exchange announced it had made significant progress with regulators over the allegations, and noted a commitment to compliance. Also, Binance admitted in a blog post that it takes full responsibility for past conduct and is “accepting a robust monitorship for our compliance and sanctions control programs.”
Last year, Changpeng Zhao pleaded guilty to money laundering charges in a Seattle court, leaving his CEO position and stepping down as Chairman of Binance.US. At the time, US District Court Judge Richard Jones stated that Zhao must remain in the US until a further review is completed and the sentencing takes place in February this year.
