How Institutions Use Mirror for Deep Liquidity Through Custody

2023-01-20  •  5 min read

Institutional adoption is key to developing the digital assets industry into a mature space that attracts liquidity and innovation. In light of recent market events, segregation of assets has become the focal point of conversations as institutions seek secure solutions that can offer the best of both worlds: security and deep liquidity. 

As the industry continues to evolve, so do the needs of institutions wanting to do more with their assets than leaving them idle in cold storage. Ceffu has been developing a unique custody solution that addresses such needs. 

Liquidity without compromising on security

After spending much of 2022 refining its operations, we saw a surge in interest and feedback on our off-exchange settlement solution, Mirror. The testing phase provided valuable insights ahead of the product’s official launch in January 2023. The solution, a core product of our cold storage Qualified Wallet infrastructure, enables our clients to lock a specified amount of their assets held in cold storage and “mirror” it onto their Binance Exchange account. 

With Qualified Wallet, each client has their dedicated on-chain wallet address, which contains only their own funds. This can be verified directly on the blockchain, as clients have full visibility into the assets’ movement. 

How Mirror works

Through the tri-party relationship between the client, Ceffu and the Binance Exchange, once the client initiates a Mirror request, Ceffu locks the client’s assets in their Qualified Wallet, which cannot be withdrawn while their Mirror position remains open. The Binance Exchange then loans an equivalent amount of assets to Ceffu, which directs the Binance Exchange to credit the loaned assets to the client’s Binance Exchange account.

Once the assets are deposited into the client’s Binance Exchange account with a 1:1 available balance, the client can use those assets to access all products and services within the Binance ecosystem, including all trading products and VIP loans. Throughout this process, the client’s owned assets remain in their  Ceffu Qualified Wallet at all times and are locked as collateral for the assets available in their Binance Exchange account.

Clients can choose to settle their Mirror position at any time directly from their Ceffu account or Binance Exchange account. Settling from their exchange account would be immediate, while going through Custody will involve on-chain settlement. Clients who do not wish to close their open positions on the exchange may choose to settle from their Custody account instead. When a client wishes to settle their Mirror position from their Custody account, Ceffu directs Binance Exchange to debit the client’s Binance Exchange account in order to repay the loan from Binance Exchange. Ceffu then releases the locked assets in the clients Custody account. 

If the client makes a trading loss on Binance Exchange, Ceffu transfers an equivalent amount of assets from the client’s Custody account to Binance Exchange to cover the loss, meaning other users on Binance Exchange are not affected.

“Mirror gives us the best of both worlds – the security of Ceffu and deep liquidity of Binance. It’s been a valuable tool for us to continue trading with peace of mind despite recent market events.”

Tae Oh – CEO, Creditcoin

Assurance on asset recovery 

Ultimately, users want to know that their assets are secure and that any exchange they trade on is financially sound. The Binance Exchange’s finances are healthy and robust, and its capital structure is debt-free. Insolvency is highly unlikely given Binance’s commitment to prudent risk management. Recently, three independent research groups separately published reports all indicating that Binance’s reserves and market standing remain strong. 

Nevertheless, in the highly unlikely case of insolvency, where a client’s assets are mirrored on to the Binance Exchange, the client’s Binance account will be debited in the amount of the mirrored assets and the equivalent assets locked in their Ceffu Qualified Wallet will be unlocked and made available to the client with the rest of their Qualified Wallet balance. If the client has recorded trading losses on the Binance Exchange, the procedure described above also applies – those losses will be deducted from the client’s assets in their Qualified Wallet and transferred to Binance Exchange to cover the loss (meaning other users on Binance Exchange are not affected), prior to the remainder of the assets being unlocked.

How institutions benefit from using Mirror

At its core, Mirror is designed to provide institutions with a secure bridge to the world’s largest crypto exchange by way of the following enablers: 

Secure access to the Binance ecosystem

Institutions reduce counterparty risk by deploying their liquidity on the Binance Exchange while their assets remain off-exchange in their insured, segregated cold storage on Ceffu. 

Maximization of capital efficiency 

Clients avoid fragmenting their liquidity across multiple venues by accessing the deep liquidity that the Binance Exchange offers with one institutional account and redeploying their assets as needed post settlement.

Settlement at any time from either platform

Clients can settle their Mirror positions at any time directly from the Ceffu web or mobile app. This, of course, is subject to all the usual security requirements associated with using a Ceffu account.

“The Mirror product is a great solution, and we’re pleased to have been a core user since its inception. Combining Ceffu's institutional-grade security standards with the benefits of trading on Binance has been a great experience. Getting started was straightforward thanks to Ceffu's professional and attentive support team. We look forward to growing alongside Mirror’s development.” 

Egor Tarasenok – Head of Business Development, Cyantarb

Unlock your assets’ potential with Mirror

Mirror is the next step in the evolution of secure custodial solutions for institutional investors. With the crypto industry’s continued focus on unlocking liquidity, the product meets the market’s most pressing needs. It is a response to client concerns and feedback, made possible by Ceffu's focus on what the client requires. We’re proud to bring to our institutional clients Mirror and the wealth of benefits that it offers.

See how Mirror can unlock the liquidity of your assets by requesting a demo.

About Ceffu

Ceffu is a compliant, institutional-grade custody platform offering custody and liquidity solutions that are ISO 27001 & 27701 certified and SOC Type 1 & Type 2 attested. Its multi-party computation (MPC) technology, combined with a customizable multi-approval scheme, provides bespoke solutions allowing institutional clients to safely store and manage their digital assets through its insured, segregated cold storage solution, Qualified Wallet. Institutions also benefit from Ceffu’s secure gateway to a wide range of liquidity products within the Binance ecosystem as Binance’s institutional custody partner.

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