Institutions can lock a specific amount of their asset balance in Binance Custody’s cold storage facility and mirror it onto their exchange account with a 1:1 balance

Binance, the operator of the world’s biggest crypto exchange, will allow institutional investors to keep the collateral for leveraged positions off the platform, a move to ease concerns caused by the collapse of one-time rival FTX.

Dubbed ‘Binance Mirror,’ the new service is an off-exchange settlement solution that enables institutional investors to access trading and investment products within the exchange ecosystem without having to post collateral directly on it.

The company said that such firms will have the option instead to post collateral with Binance Custody, which will hold the assets in so-called cold storage, or wallets that are unconnected to the internet. After the trades are settled, the assets would then become unlocked and accessible to the user again.

According to the official press release, institutions can lock a specific amount of their asset balance in Binance Custody’s cold storage facility and mirror it onto their exchange account with a 1:1 balance. The platform highlighted that user assets remain secure in their segregated cold wallet for ‘as long as their Mirror position remains open on the exchange, which can be settled at any time.’

Binance Custody, launched in 2021, is a separate legal entity registered in Lithuania, the company said.

The collapse of FTX late last year sowed doubts about the ability of crypto exchanges to keep assets safe after prosecutors alleged it misused customers’ funds.

After FTX’s demise, users yanked funds from Binance and other rivals. At the peak of that pullback in early December, users withdrew billions of dollars in one day from Binance’s trading platform. Additional concern surfaced in mid December when the accounting firm Mazars halted work for Binance and other crypto firms on proof-of-reserves reports.

Our clients are a lot more conscious of managing risks, said Catherine Chen, the head of VIP & Institutional at Binance, in an interview. We hear from our users that they love to trade on Binance, but at the same time they are getting ‘pressure’ from their internal risk control. For them to scale up further activities on Binance, they need to look for ways to help them diversify the on-exchange risks.

Binance’s institutional arm, catering to proprietary trading firms, hedge funds, family offices and others, said its new clients increased by 17.4% in the fourth quarter from the prior quarter, according to a company spokesperson.