Introduction to the New Partnership
In a significant development for cryptocurrency traders, BitGo, a leading qualified custodian, has teamed up with Copper, the innovative firm behind the ClearLoop settlement system, to offer off-exchange settlement services for users of the options exchange, Deribit. This partnership aims to enhance security and efficiency for traders navigating the evolving landscape of digital assets.
Enhanced Security for Trading Operations
With the recent volatility in the cryptocurrency market, particularly following the FTX collapse, traders are increasingly prioritizing the safety of their assets. The collaboration between BitGo and Copper allows clients to engage in spot and derivatives trading on Deribit while their assets are securely stored off-exchange in a regulated custody environment managed by BitGo Trust. This strategic move minimizes the risks associated with keeping assets on exchanges.
How the Settlement Process Works
The integration of BitGo and Copper’s ClearLoop network enables a seamless delivery versus payment (DvP) process. This means that any client of BitGo can instantly settle transactions with other BitGo clients through atomic swaps, all without moving assets on-chain. Brett Reeves, head of BitGo’s Go Network, emphasized the advantages of this system, stating, “We can do this DvP settlement from cold storage, and there’s no fees for it.” This capability effectively reduces settlement risk, commonly referred to as Herstatt risk, by aligning it more closely with traditional finance practices.
Asset Management and Settlement Dynamics
Under this arrangement, assets are held securely within BitGo’s regulated custody. During pre-defined intraday settlement periods, the assets due to Deribit are transferred from a BitGo account into the Copper ecosystem for settlement. Conversely, if the assets are owed to the client, they are returned to the BitGo account. Reeves explained, “The bulk of the client’s assets remain within BitGo custody, apart from a settlement time when they move to exchange. At settlement time, that’s the P&L they owe on the transactions, or the variation margin on their positions.”
Future Implications for Cryptocurrency Trading
The strategic partnership between BitGo and Copper promises to unlock new opportunities for investors and significantly transform the trading landscape. Luuk Strijers, CEO of Deribit, highlighted the potential of this collaboration, stating, “The synergies between our companies will unlock new opportunities for investors and will completely change the landscape of trading.” As this partnership unfolds, it could set a new standard for safety and efficiency in the cryptocurrency trading realm.
