Babbitt Depth | Xing Shi asked "the most" OTC, the old money entered the crisis

OTC (Over the Counter), also known as the over-the-counter market, has been mentioned more and more this year. For example: Bit Continental Wu Jihan, Ge Yueyu co-founded Matrixport, laid out the OTC market; Plustoken MLM was arrested overseas, OKex, Firecoin OTC lay gun; OTC trading volume is 3 times that of the exchange, the price of the currency rises or the organization runs Admission.

Many people will confuse the above situations because they are all called OTC . This is not true . From the perspective of service targets, OTC is divided into retail market and institutional market; from the perspective of transaction currency, it is divided into currency trading and legal currency trading; from the role of service provider, it is divided into the trading mode of doing the trading of competitors and doing The matching transaction mode of the guarantee service.

How big is the OTC market size? In April 2018, Bloomberg reported that the daily volume of OTC transactions in digital currencies fluctuated between $250 million and $30 billion. In comparison, the real trading volume in the same period is about 15 billion US dollars per day. However, due to the nature of the OTC transaction, it is not subject to centralized statistics, so it is difficult to accurately estimate.

“The consensus in the market is that the volume of digital currency OTC transactions is much larger than the volume of on-market transactions. The ratio should be between 1.5 and 3 times. From the trend, the average ratio of over-the-counter trading to on-floor trading has been rising slowly for a long time. In the case of volatility, the volatility of OTC trading volume is significantly greater than the volatility of intra-exchange trading.” Koi Trading co-founder Harry Zhou told the author.

The author recently consulted various OTC platforms, interviewed and consulted a number of digital currency OTC practitioners, wrote this article, and hoped to clarify the mysterious OTC market for everyone.

The most common: the exchange currency trading section

When it comes to OTC, the most common thing for everyone is the legal currency transactions of various exchanges, usually by means of over-the-counter C2C. It is a way to avoid the risk of currency exchange for the exchange's currency transactions, and it is a way of avoiding risks. The self-operated OTC trading platform also takes liquidity from its own exchanges.

QKL123 includes 270 platforms for providing OTC services, most of which are OTC sections of exchange currency transactions, including: Firecoin, OKex,, CoinBene, Bit-Z,, WR, CoinEgg, EXX, OTCBTC, MXC Matcha, etc.

In addition to exchanges, some wallets also offer OTC services, such as currency letters. I remember that at the end of 2018, all exchanges closed the French currency recharge channel. I bought Bitcoin in the OTC market. In June of this year, they upgraded the OTC sector to the merchant model, which is to increase the ToB business.

However, there is no essential difference between the above OTC services. Some exchanges carefully split the currency transactions and legal currency transactions into two brand operations, such as Linkcoin, which is Bibox's over-the-counter trading platform. Some exchanges do not directly carry out this business, but cooperate with OTC service providers, which is equivalent to "outsourcing", such as HitBTC and Trusted volumes. Other exchanges play more roles. For example, Digifinex's over-the-counter transactions, in addition to P2P's small transactions, have also made a large amount of off-exchange zones to directly buy and sell digital currencies to the platform.

In May 2018, the veteran digital currency exchange Coinbase launched Coinbase Prime, which increased its OTC business at the end of the year. In March of this year, Coinbase Custody, the Coinbase hosting service, completed the first OTC transaction directly from cold storage. The integration of these two services means that customers can omit the process of transferring funds and directly conduct OTC transactions.

“Many organizations are using OTC transactions as an entry point for cryptocurrency transactions. As a complement to the exchange business, we are introducing over-the-counter (OTC) services. We believe that both exchanges and over-the-counter transactions are available, which is for customers. Very convenient.” Coinbase sales director Christine Sandler's remarks tell the basic logic of many exchange OTC businesses.

The most classic: P2P secured trading model

In fact, the platform for focusing on OTC trading is earlier than the OTC sector of the exchange. Although in terms of model, they are all matching transactions, the platform provides hosting and guarantees, but the purpose is different.

Prior to 9.4, many Chinese exchanges had a currency recharge channel, in which case the exchange did not need OTC at all. Today, the exchange's OTC business is more like a helpless move. As a supplement to the currency business, the main role is the legal currency inflow channel. The early OTC platforms, more purely for the demand of buying and selling digital currencies, are not limited to legal or currency, showing a global, distributed form.

In 2016, the old cat had serialized four documentary novels on Babbitt, titled "Becoming a Professional OTC Trader from 0" , telling how he became a seller on the OTC platform, posting advertisements, brushing transactions, Received remittances, sold bitcoins, and experienced various pits such as extortion and fraud. Now, I can still feel the inner activity of the uncle and excitement of the cat.

The OTC platform mentioned in the old cat article is LBC. I guess it should be LocalBitcoins. This is a P2P platform for trading with real people. It was established in 2012 and is headquartered in Finland, allowing people from different countries to use their own currency. Buy bitcoin. It should be regarded as the originator of the OTC section of the exchange. The seller publishes an advertisement for selling bitcoin on the website, and explains the payment method and exchange rate. The buyer can choose to trade directly or directly in the face of bitcoin. LocalBitcoins provides hosting or money transfer services, which charge a 1% fee per transaction.

The statistics on LocalBitcoins' official website allow us to see the needs of the OTC market: there are 7111 cities in 248 countries, and 7 of them are sellers with cash transactions of more than 10,000. (75150), Russia (52593), Venezuela (39228), United Kingdom (22758), India (14972), China (13405), Colombia (10426), which means huge French currency flows.

The most mysterious: OTC service provider

Knock on the blackboard! This part is what I most want to introduce to you. We often say that "institutional admission" is through such OTC service providers . In contrast, the exchange's OTC business is more targeted at retail investors, providing guarantees and entrusted services for matching transactions. The OTC service provider provides the inquiry transaction service. The user obtains the transaction quotation by inputting the transaction quantity or the transaction amount, and the platform acts as the counterparty, determines the price, and deals with the user with the transaction quotation.

Since this is a ToB market, it is mainly aimed at institutions and large households. It is not common for them to publicize and be mysterious, which makes the process of collecting information by the author a little hard. In the end, the author sorted out the following relatively mainstream OTC service providers.


It can be seen that they were established from 2011 to 2019. They are located in the United Kingdom, the United States, Singapore, Poland, Hong Kong and other places. Most of them have applied for compliance licenses and have been favored by investment institutions.

Among them, the most well-known is Goldman Sachs, IDG's investment, and the OTC trading platform Circle Trade, a Silicon Valley mobile payment company. On January 3, Circle officially issued an announcement stating that there were 10,000 over-the-counter transactions in 2018, with a total transaction volume of $24 billion. In addition, Chicago financial giant DRW subsidiary, the digital currency over-the-counter trading platform Cumberland Mining, currently supports more than a dozen French currency, indicating that its total transaction amount has exceeded Circle Trade.

What kind of competition pattern does this kind of OTC service provider show? According to Harry Zhou, co-founder of Koi Trading, it can be broken down into three categories:

The first category is the plain and extensive OTC. Such OTCs are generally developed from a long-standing grey trading platform. Without a license, the types of transactions involved far exceed digital currency. It is aimed at customers with cross-border capital flow needs. The plain and extensive OTC is mostly in Hong Kong and the Middle East. Negative conjectures about the OTC market, such as money laundering channels and market manipulation, stem from this.

The second category is the traditional canonical OTC. Such OTCs generally have formal licenses, which are mainly based on the personal resources and professional knowledge of traders, and are mainly used to serve customers with high privacy and communication convenience requirements. Such OTCs can be compared to private banking services in the United States, Singapore, the United Kingdom, and Hong Kong.

The third category is fine-intensive OTC. Such OTCs are generally formed by senior investment firms of former investment banks or those with similar experience in the industry, and have the internal technical development force to build an investment banking-level trading system. The fine-intensive OTC can provide both manual trading services for traditional canonical OTCs and productized platforms (such as the single counterparty trading platform SDP), giving retail users the advantage of OTC transactions.
These OTC service providers have extremely fierce competition in the same category. But once across categories, competition is less intense because of the different customer needs. It can be seen that an important element to distinguish them is compliance, and the specific implementation level is “ license ”.

The reason why OTC service providers are concentrated in the United States, Singapore and Hong Kong is because these places can provide licenses for related businesses. For example, in the United States, MSC licenses under Fincen, holders can apply for virtual currency payment services; New York State limited purpose trust company licenses can engage in stable currency business; New York State's Bitlicense, ATS, Broker-Dealer licenses can be used as virtual currency Transaction; the state's Money transmitter license, which mainly provides remittance services or payment instruments.

But in many cases, the use of license plates is more like playing the ball, and there is no clear correspondence. There are many types of OTC services, and there is no such thing as an "OTC license". Just like there is no so-called digital currency "legal currency license", specific analysis of specific issues is required. Moreover, many virtual currency platforms have not been able to obtain their own licenses, but rather the licenses of the “蹭” parent company. For example, Cumberland is actually a traditional broker-dealer license with its parent company DRW.

Are there any advantages or disadvantages to these licenses? “As long as the license can support the required OTC business, there is no need to compare the gold content. If it is necessary to compare, then it can support countries with a larger transaction volume, and the licenses for trading a wide variety (even securities tokens) will be more scalable. Currently, only a very small number of European and US OTCs have such qualifications," said Harry Zhou.

In fact, the reason why OTC service providers have tried their best to apply for a license is to open a special bank account that supports the virtual currency business. This is the hardest place, ” said Koi Trading co-founder Jimmy. For example, in the United States, Silvergate Bank and Signature Bank will provide related services, but there are various conditions in the bank account application form, and the risk control is strict, and it needs to be queued and other compliance departments for approval. At the beginning of the year, many companies opened accounts and queued for 5 or 6 months, and they were not approved.

The most cautious: currency trading inquiry mode

Finally, I want to talk about Matrixport alone. On July 8th, Matrixport, a new project jointly established by the founders of Bitland, Wu Jihan and Ge Yuezhen, was officially launched. The project is targeted at the hosting of digital assets, OTC, investment and lending.

In the above table, I also included Matrixport because Matrixport is also the inquiry mode. However, according to Babbitt, Matrixport currently only provides currency trading services, and other OTC service providers in the above table provide legal currency trading services. I think it may be due to risk isolation. However, with the capital strength of Matrixport, it is not difficult to apply for a compliant bank account, so the legal currency transaction can be expected in the future.

The reason for writing Matrixport is mainly because the needs of many OTC service providers are exogenous, and Matrixport has a huge endogenous demand . Babbitt columnist Goto's metaphor is very vivid. He said: "Matrix is ​​essentially a blockchain asset bank that uses miners' resources and reserves to provide access to large clients such as institutions." After 10 years of development, the money market has gradually grown up as a group of “giants”. These giants are constantly improving their business lines and building a closed loop of business.

“Matrixport's long-term vision seems to be a dual integration of vertical and horizontal dimensions, and relying on a fiduciary license to provide a range of services including OTC. We think this is a good strategic deployment. Relying on upstream and downstream information integration (eg digging) “Mineral costs and transaction data” and the horizontal dimension of business lines (such as the highly complementary of the custody business and the transaction business), Matrixport will be a very competitive company in the industry.” Koi Trading co-founder Harry Zhou said.

It seems that the low-key and mysterious OTC market is becoming more and more a battleground for the military. So what are the challenges and opportunities in the current OTC market? Harry Zhou said that it is mainly traditional financial admission.

Opportunities are reflected in the digital currency field, which has a certain trust base due to years of precipitation and projects such as Libra. Therefore, family funds and companies with asset allocation needs are entering the digital currency through OTC, which is beneficial to OTC's profit margin and transaction volume.

The challenge is reflected in the fact that talents in the traditional financial industry have joined the digital currency industry to develop OTC business, and the industry's professionalism has rapidly increased. This puts pressure on existing OTC markets that do not have core competencies such as trading technology or customer resources.

In addition, traditional financial admissions have also brought regulatory attention. The FATF's recent guidelines and statements from many governments indicate that from the first quarter of 2020, the overall probability of regulation and enforcement of the digital currency industry will be normalized and substantive, and the OTC trading platform that cannot bear the cost of compliance is likely to receive it. Great impact.