The major U.S. cryptocurrency exchange and wallet provider, Coinbase, is shaking things up by introducing over-the-counter (OTC) trading options tailored for institutional clients. This news broke courtesy of the live streaming financial news network Cheddar on November 27.
What is Over-the-Counter Trading?
For those navigating the crypto waters, OTC trading allows institutional investors to engage in direct transactions without the need for a public exchange. Think of it as the VIP lounge of crypto trading—where trades happen behind closed doors, away from the noise of the trading floor, allowing for a more discreet and tailored trading experience.
Institutional Demand on the Rise
Christine Sandler, head of sales at Coinbase, points out that this strategic move comes as a response to an escalating interest in OTC trading from institutional players. She remarked that providing both exchange and OTC trading is a “huge benefit” to customers, effectively bridging the diverse needs of institutional traders. Here’s Sandler articulating the rationale:
“We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading.”
Integration With Coinbase Custody
In line with enhancing their services, Coinbase is considering merging its new OTC offerings with Coinbase Custody—a service that provides secure storage solutions for institutional investors. This integration is expected to facilitate smoother transactions and improved asset management for clients.
Expanded Trading Options
Cheddar reports that Coinbase is ramping up its trading capabilities by enabling clients to trade any asset accessible on the Coinbase Prime platform. It also rolled out a variety of order book options which include traditional interfaces, Skype, Bloomberg IB, email, and phone support. A move that certainly caters to the varied preferences of institutional traders, making the trading process as seamless as possible.
Regulatory Journey Ahead
In a bid to become a fully regulated broker-dealer, Coinbase initiated the process with the U.S. Securities and Exchange Commission (SEC) on June 6. This is pivotal as they seek to enhance their range of crypto-related services, including OTC trading and margin trading. To bolster this endeavor, Coinbase made significant acquisitions including Keystone Capital Corp., Venovate Marketplace, Inc., and Digital Wealth LLC.
Comparing OTC Services
Coinbase isn’t alone in the OTC arena. Competitors like Circle, which has backing from Goldman Sachs, offer a similar OTC service known as Circle Trade, introduced in February 2018 following the acquisition of the Poloniex exchange. As institutional interest surges, these services could redefine how large-scale investors approach the crypto market.
A Growing Trend
With the landscape of crypto trading evolving, services like OTC trading from Coinbase represent a significant shift in how institutional investors operate. As these firms seek more efficient and private trading avenues, the demand for such services will likely continue to grow. It remains to be seen how this will impact the family of crypto services in the long run.
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