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What really happens to a crypto OTC desktop? – Cointelegraph magazine – Mail Bonus

Surface or OTC trades refer to any trade that is not made through an automated stock exchange. What exactly are OTC trades? Who does it and why? To learn more about what an OTC desk is and how these “radar” exchanges work, Magazine spoke to several insiders to get the results.

The most popular concept for OTC trading involves huge off-market contracts, such as when companies like MicroStrategy make multi-million dollar purchases with OTC desktops powered by Coinbase or Kraken.

However, OTC trades are not just rich countries, as they can also apply to peer-to-peer platforms like LocalBitcoins, which has been helping individuals trade BTC both in person and by bank transfer since 2013. Even some cryptography. ATMs can be classified as OTC trades, as these trades do not always clear the stock market. Between these two are medium-sized regional OTC desktops, which facilitate the purchase and sale of encryption for both individuals and businesses.

What’s really going on behind the scenes at the OTC desk?

To go on sale

Why do people first look for bids in bargain sales when existing exchanges like Binance and Coinbase offer easy fiat lanes?

Amin Rad, CEO of OTC broker Crypto Desk in Dubai, explains that this business method offers benefits to some people. He says there are only “a few ways to convert fiat currency into cryptocurrency,” and underlines three:

Credit and debit cards are a popular way for new users to buy cryptocurrency through the stock exchange, but they come with high fees of up to 10%. However, many banks and credit card issuers still consider such transactions suspicious, locking or even closing accounts after studying the nature of the transactions. On the exchange rate side, the credit cards of certain countries – including Russia, Kazakhstan and Ukraine – are automatically rejected. “Another limitation is that users can not sell cryptocurrencies in this way, just buy it,” adds Rad, as it is usually impossible to “withdraw” money on a credit card.

“The other way is to buy by bank transfer,” he says, which involves sending fiat to a stock exchange’s bank account. Rad believes this is a problem because many banks, in some countries more than others, do not want to link to a cryptocurrency or let their customers do business with it. “If you want to transfer money, in 99% of cases you have to lie to the bank, otherwise they will close the account,” he says, but his views probably apply to his own area, the United Arab Emirates. [Editor’s note: Don’t lie to your bank lest you end up like Peter McCormack.]

Banks that accept cryptocurrencies can still ask their correlation team to ask detailed questions about the exact destination of funds and the rationale behind cryptocurrencies. And when transfers are processed, they can take several days. Someone might try to send money to the stock exchange on Monday to buy BTC at $ 30,000, only to watch it rise to $ 40,000 before the money arrives on Thursday.

3. OTC is the third method, which allows buyers and sellers to exchange directly or through a trading platform such as that operated by Rad. No credit cards are involved and banks can not easily decide that the funds they are sent are intended to be used for cryptocurrency. With immediate confirmation of receipt, there is no need to wait for many days and possibly miss an opportunity.

Amin Rad
Rad at his office in Dubai.

“The big driving force behind OTC is that it enables the buyer to deal with larger amounts of cryptocurrencies, such as 100 BTC from one seller at one agreed price, compared to buying on a stock exchange,” explains Jerry Tan, OTC Payment Manager in Singapore. -based replacement XTwhich operates a bidding desk.

From a whale point of view, such as funds that hold large amounts of cryptocurrency, OTC desks are valuable because of their ability to conduct large trades without moving the market against them. This effect is known as “slippage” and occurs when large-scale purchases cause prices to rise immediately before the intended amount of cryptocurrency has been purchased, while sales cause it to fall before all are sold.

“The probability is that one seller in the order book is not able to have such a large amount and 100 BTC. Therefore, you need to buy from many sellers at higher prices. This is where the deficit from your original preferred price occurs.

Despite many reasons for participating in OTC trading, there are risks, according to Victor Olmo, the fund’s partner at NewTribe Capital. “One of the most important is the counterparty risk – the possibility of the other party’s default before the contract is fulfilled or expires,” he explains. Scam is another common pitfall, which was described by many in recent times Trips in the Blockchain article installation of Rad and his Crypto Desk OTC exchange.

Amin Rad
Rad told his story and gave advice on avoiding cryptocurrencies, in a recent article on Journeys in Blockchain.

Who uses OTC exchanges like Crypto Desk?

Although Rad’s operations are local in the UAE, he says clients tend to fall into two major categories: Local buyers of cryptocurrencies tend to represent ‘traditional finances’ spread across the industry, while foreign sellers already have cryptocurrencies and need to replace it with a local currency “To buy real estate, cars and pay their living expenses in the UAE.

These expenses can even include the purchase of real estate, but then it is quite understandable that neither sellers nor buyers want to risk going through traditional exchanges and transfers, where banks can close, freeze or doubt that large sums are taken directly from cryptography. exchange. Although its daily turnover is in the single digits of millions, it tends to consist of a few much smaller offers that do not exceed the capabilities of ordinary people – many of whom do not want to have problems with their banks, which could hinder transfers between cryptocurrencies .

Different rules

The Dubai Cryptocurrency is an example of a low-threshold securities brokerage, where clients only have to prove their identities and sign a declaration that they are not involved in terrorism, money laundering or trade with punished countries. “Once I get this from you, I’m safe. Even if the government comes after you later, I can say that I did my job. ”Rad says he does not have to report records, no matter how big they are, but he keeps files indefinitely.

When it comes to other OTC desktops, the rules are usually on par with the usual KYC identification requirements, although they tend to be less restrictive.

According to Panu Peltola, Finland’s Supervisor of LocalBitcoins, most regions of the world are tightening rules. He cites Asia as the “most advanced” regulation, second only to North America.

“The EU is just planning a broader regulation,” he points out regarding the proposed rules to flag all transactions over € 1,000 from an “unboxed wallet” – any wallet not owned by a centralized company such as a cryptocurrency exchange or a payment provider.

“Global policymakers have noticed an increase in volume and adoption rates and are now balancing innovation, growth and risk.

In the United States, all cash transactions over $ 10,000 must be reported separately to the IRS, regardless of whether the individual or financial institution receives the cash. This form requires all personal information about the person from whom the money was received. Although only a minority of bids in the sale include physical cash, this $ 10,000 mark marks the same level as the proposed EU € 1,000 ceiling, as well as the ceiling that financial institutions across the United States must notify for electronic money transfers. In particular, the real value of these amounts is gradually declining due to rising inflation.

When cash changes hands, the IRS wants to know all about it! Source: IRS

The regulatory landscape in Asia, which has many more countries and lacks supranational centralized decision-making bodies such as the EU, seems more fragmented and difficult to describe, as each country has its own current and forthcoming regulatory process. China’s mainland, a country with strict capital controls, is perhaps the most restrictive, with its ambition to completely ban trade and mining. In October 2021, the Cointelegraph spoke with Henri Arslanian, PwC crypto leader and former chairman of the FinTech Association of Hong Kong, about the “flood” of brick-and-mortar OTC stores.many of which are located in tourist areas to accommodate visitors from the mainland.

“One would expect that if Chinese tourists visit Hong Kong, nothing will stop them from buying cryptocurrencies in these specialty stores.

But even Hong Kong, once considered one of the most financially open in the world, is on the verge of being banned retail trading in cryptocurrency, which would theoretically include OTC, would likely send OTC stores underground.

Singapore recently introduced stricter measures, according to Tan from XT. “Companies wishing to trade in cryptocurrencies and OTC services for Singapore residents must obtain a license from the Payment Services Act,” he explains, adding that exchanges without a PSA license are not allowed to offer services to Singapore residents. In addition, all Bitcoin ATMs on the island were ordered to close earlier this year.

Talking money

So, how to make OTC desktop money? With distribution, in a way that is comparable to normal exchange. While popular exchanges may charge 0.25% of trades, it is common for an OTC desk to charge well over 1% in commissions. In 2017, 2% –3% margins were common, says Rad.

In principle, the bidding desk operates either by matching buyers and sellers or by fulfilling orders automatically from its own liquidity fund, as the former carries less cost and risk for the stock exchange and the latter allows for immediate trading. “That’s why customers choose to deal with me,” says Rad of his desk’s advantage of having its own treasure trove of reliable business.

OTC desktop
OTC desks provide a way to prevent landslides on stock exchanges.

Another distinction between desktops is whether they trade fiat for cryptocurrencies like Bitcoin or Ether or only for stablecoins like USDT or USDC. In recent times, there has been a trend towards stablecoins because they give buyers more flexibility to switch to more volatile cryptocurrencies when they see fit. Some exchanges such as Rad’s Crypto Desk only deal with stablecoins, which further reduces the risk of maintaining a liquidity pot.

Rad is confident that the OTC market will flourish, both among retail and institutional customers, due to its direct, intimate nature compared to larger stock exchanges. For many, it is more convenient to trade between people than to send money to a stock exchange abroad, especially when it comes to large, one-time transactions.

“Local [OTC] Stock exchanges will control local markets because they have better knowledge of their own market – they have better compliance solutions and better licensing solutions.


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