Binance, the world’s largest cryptocurrency exchange, is offering digital asset managers special accounts that allow pooling of their investors’ assets to make crypto fund management operations feel more like a traditional finance experience.
The omnibus “Fund Accounts” introduce a universal net asset value (NAV) per unit concept used by buyside firms to provide a clear and trackable profit-and-loss for each fund, addressing the lack of a common market standard in crypto asset management, Binance said on Wednesday.
Unlike the rarified world of high finance, crypto trading is still developing from a relatively unsophisticated retail market into a more institutional-friendly environment, a process that requires a transformation of infrastructure.
“Asset management is a very mature and well established industry in TradFi,” said Binance head of institutional and VIP Catherine Chen in an interview. “In crypto, we think there’s a lot of demand for this particular expertise and infrastructure because, for the time being, the entry barriers and the learning curve remains relatively steep.”
There are pain points for both investors and managers, Chen said. For investors, trust is important, so using an established brand with clear proof of reserves and transparent NAV are key factors, she said.
Eligible asset managers, who need to be licensed in their respective jurisdictions, no longer face such a heavy burden of admin and other operational tasks, and can create multiple fund accounts and deploy different trading strategies tailored to each fund.
The expected size of asset managers likely to be attracted to Binance Fund Accounts could range from about $1 million assets under management (AUM) at the lower end, to around $20 million, Chen estimated.
“It’s gonna be a mixture. But obviously this type of infrastructure is really catering to those newer or smaller asset managers to bootstrap and properly scale the business,” she said.