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Coinbase Opens Over-The-Counter Crypto Trading Desk


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By Landon Manning

In an exclusive interview with Cheddar, Coinbase’s head of sales Christine Sandler announced that the cryptocurrency exchange’s prime customers will be able to conduct over-the-counter (OTC) transactions.

Coinbase has long been one of the most prominent cryptocurrency exchanges in the industry, having established itself relatively early and maintaining a high volume of clients. However, like most transactions conducted in these exchanges, a third party is often involved in trades taking place on Coinbase.

The role of the exchange in these interactions is not to directly hold the crypto assets itself, but rather to connect potential buyers to outside parties that are interested in selling those amounts. Coinbase is apparently looking to overturn this model, and the details provided in the initial interview give some insight into its immediate strategy.

OTC trading is conducted “typically between an investment bank and its clients,” per Cheddar, which may explain why this model will only be available to prime clients at first.

Coinbase announced its plans for OTC trading in May, and launched the option of prime membership shortly thereafter “to lure institutional investors with trading tools and with longer-term plans to present over-the-counter trading, algorithmic orders, and advanced market data products,” as reported in Cheddar.

Sandler claimed that the OTC operations are “a complement” to Coinbase’s exchange business because “a lot of institutions were using OTC as an on-ramp for crypto trading.” She added, “We felt this was a huge benefit to our clients to actually leverage both our exchange and our OTC business.”

It seems that this initial rollout, tied to the more serious and institutional investors through Coinbase Prime as it is, could serve as a test run for wider adoption of OTC trading. Sandler noted that Coinbase would eventually expand this new service and incorporate it with Coinbase Custody, a platform launched in July that serves as a more general tool for “hedge funds, exchanges and ICO teams.”

It is worth noting that both Coinbase Prime and Coinbase Custody are ultimately intended for institutional clients and were not designed for retail investors. It is not clear if this OTC service is ever intended for the more mundane actions of Coinbase’s average customers, or if the average private crypto buyer will have to continue working with third parties for the foreseeable future.

Either way, Coinbase is building infrastructure that is comparatively underutilized in the crypto exchange space, and this may yield greater benefits depending on the project’s initial successes.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: News Headlines , Cryptocurrency , Currencies , Fintech



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