Binance approves cold crypto storage for institutions

Photo of author

By A D

The news was released immediately after Binance saw its liquidity drastically decline. Changpeng Zhao, CEO of Binance, still acknowledged that centralised exchanges may one day be unnecessary in light of the expanding self-custody trend.

Binance announced the formal launch of Binance Mirror on January 16, 2023, an off-exchange settlement service that enables institutional investors to invest and trade crypto via cold custody. The recently introduced Mirror service mirrors cold-storage assets using 1:1 collateral stored on a Binance account. Binance Custody is a regulated institutional digital asset custodian that underpins this service. Traders can now join the exchange ecosystem without having to personally post collateral, according to Binance, who underlined that the new approach provides greater security.

A custodian platform with its own cold-storage options, Binance Custody was introduced in 2021 and protects protected assets against external interference, internal theft, physical loss, and damage. In order to run an institutional-grade digital asset custody solution, Binance Custody obtained cold-wallet insurance in Lithuania in March 2022. Over 60% of the assets safeguarded on Binance Custody are on Mirror.

As the world of cryptocurrency expands, so do the pain points. With the increase in prominence, there is a higher incidence of thefts, fraud, and hacking. Victims of these scams are often left stranded due to the lack of set regulations in the crypto space.
The community countered this issue with the introduction of cold storage. Cold storage is the term for assets kept offline, frequently using a tangible item like a thumb drive. Your wallet is empty when you store your keys in cold storage. Because ownership is recorded on the blockchain, your cryptocurrency is still visible in your wallet, but you cannot use it until you return the keys you intend to use to it. Users must choose how to keep their cryptocurrencies in the safest, most secure manner imaginable while maintaining access to them.

As crypto wallet market value increases, it it possible cold wallets may also gain big. photo credits: ledgerinsights

The rising threat of cybercrime and the risk of lost privacy keys have pushed for greater adoption of secure cold crypto wallets, causing an expansion in the cryptocurrency cold wallet market. In December, Binance had a notable 66.7% market share compared to 48.7% at the start of the year; despite trade volume in centralised exchanges dropping by 46% this year. With a marked two third market control among the 11 other exchanges, the top cryptocurrency exchange maintained its stronghold on the market.

In 2022, approximately 450,000 BTC held on exchanges and hot wallets were moved to cold storage. This had a tremendous impact on the exchange reserves; for instance, the market collapse caused a decrease of around 20% in BTC. Even so, the crypto wallet market was valued at USD 8.42 billion in 2022. It is being predicted that the crypto wallet market will reach USD 48.27 billion by 2030, with a compound annual growth rate of 24.4%. During this period, significant expansion in the cold wallets segment is expected.

Leave a Comment