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Coinbase Launches OTC Trading for Institutional Clients

Media outlet Cheddar has reported that major US-based cryptocurrency exchange Coinbase has launched an over-the-counter (OTC) cryptocurrency trading desk.

This move has been described as “opportunistic” since they were “reacting to client demand” geared towards broadening its customer base to include more institutional clients. Nevertheless, plans had been in motion since June and had only been waiting for a regulatory license, which Coinbase President and COO Asiff Hirji clarified that it would help the firm offer future services that include OTC trading.

OTC trading attracts large investors mostly classed as institutional investors, such as investment banks. These transaction types take place between two traders directly without the presence of a third-party order matching-system like regular cryptocurrency exchanges.

The service is currently available to Coinbase Prime customers, a service which was also launched to lure institutional investors such as cryptocurrency hedge funds that control large amounts of funds. Prime has sophisticated trading tools and was initially designed to also include OTC trading.

Coinbase’s head of sales Christine Sandler pointed out in the interview that the service was launched as a complementary service to its exchange business, noting that institutions were using OTC as an “on-ramp for cryptocurrency trading”. This she said is an opportunity for their clients to benefit by leveraging both the exchange and the OTC business.

In comparison, Sandler described Coinbase’s OTC agency as a platform that matches client orders directly, as opposed to Circle’s and other similar OTC services where such platforms trade on a “propriety basis” and are “counterparties to each transaction”.

Circle’s version of the OTC desk, referred to as Circle Trade, has a minimum ticket size of USD 250,000 for both individual and institutional investors.

Moving forward, Sandler said plans are in motion to expand the OTC service to include delayed settlement and possibly integrating with its Custody Solution as well. Launched in July, Custody Solution is Coinbase’s platform for hedge funds, exchanges and ICO teams.

On the subject of volatility, Sandler said that the stablecoin launch for all their clients about a month ago is one of the things they are “really excited about”, noting that USDC is “one of the most liquid stablecoins” trading right now and that stablecoins help mitigate against volatility.


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