OTC Cryptocurrency Exchanges Enjoy Increased Volume after High-profile Cyber-attacks on Online Exchanges

Online cryptocurrency exchanges have suffered a lot of high-profile cyber-attacks over the past 6 months. More and more traders are looking for alternatives to protect their fiat and digital assets in a volatile market. The over-the-counter cryptocurrency market is gaining popularity among traders. The OTC cryptocurrency market moves millions of dollars of coins every day, mostly through Skype.

According to cryptocurrency hedge fund Galois Capital founder Kevin Zhou, interested individuals would trade through an OTC desk when they have a large block trade they’d like to do without suffering too much slippage or moving the market so much. Over-the-counter transactions are completed via bank wire transfers and sending cryptocurrencies to the trader’s digital wallet. These kinds of transactions are individually audited and not reported. According to some dealers, their desks often deal with over $100 million in trades every day with a minimum ticket size between $75,000 and $250,000. An over-the-counter trader said that when the big exchange hacks occur, they tend to see an increase in business.

Genesis Global Trading, a broker-dealer based in New York, deals with $75 to $80 million in cryptocurrency trades every day. The company reached a volume between $1.5 and $2 billion in December. Circle, a Boston-based cryptocurrency firm, managed up to $4 billion in over-the-counter trades every month over the past year.

Cumberland Mining, a cryptocurrency firm based in Chicago, has been opening offices across Europe and Asia and hiring employees. Most investors send a message to traders, but cryptocurrency firms require them to go through anti-money laundering and know-your-customer checks with their compliance department. Trades are done together, usually by the back office of the company. This is why Skype is the best tool for such transactions. Skype is not only free, but also allows people from different parts of the world to communicate.

Over-the-counter firms, however, are forced to cope with the lack of clear guidelines from regulators. The Securities and Exchange Commission has stated that some cryptocurrencies might be securities, but didn’t specify things further. Bitcoin is considered by the U.S. CFTC or Commodity Futures Trading Commission as a commodity. The kind of asset to be traded and whether it should be traded with a credited investor determine if companies register U.S. regulators. These factors will also determine the compliance rules that they should follow.

Cumberland trades 25 to 30 cryptocurrencies. The firm also encourages regulators to work with participants to completely understand the crypto market and the effects of new rules and laws. Genesis is a registered broker-dealer with the Industry Regulatory Authority and Securities and Exchange Commission. The company only provides trading in 7 coins and records conversations between traders and clients. Genesis is a highly regulated cryptocurrency firm. Circle has an over-the-counter desk that trades a limited selection of digital currencies aligned to the company’s regulatory licensure. The firm also works closely with regulators to promote transparency in the OTC cryptocurrency market. Individuals who are interested in over-the-counter transactions should understand what it is all about before doing anything to avoid any losses.