New market-led initiative enables instant and secure cryptoasset trading across six exchanges
Copper, a London-based digital asset infrastructure provider, has launched ClearLoop, a tool for investors to instantly settle crypto trades off-exchange.
Over a year in the making, the ClearLoop application programming interface (API) has already been integrated into leading crypto exchange Deribit, in addition to five further exchanges including AAX, Bitfinex, CoinPass, Deversifi, and Xena.
To date, asset managers trading cryptoassets have had to move their assets from their secure cold wallets into the hot wallets provided by exchanges, a process which can often take more than one hour for even one blockchain confirmation. These delays are exacerbated when taking into account withdrawal times post-trade. ClearLoop eliminates this by enabling off-exchange settlement, which takes less than one second.
As a result, ClearLoop enables traders to react faster and execute significantly higher volumes per transaction. Historically, asset managers have limited the value of assets that can be stored in an exchange’s hot wallet at any one time in order to mitigate security and counterparty risks. However, this risk is negated if the assets are not transferred to the exchange until the trade has already completed.
ClearLoop ensures that both the client and the exchange have enough assets allocated to cover any position submitted by a trader before it is opened. Copper then settles fiat and crypto trades instantly between parties after the trade has taken place.
It also enables investors to have full control over their response to market motion and price action. Traditionally, cryptoassets can take up to an hour to transfer between wallets and exchanges while blocks are confirmed, causing high settlement times. ClearLoop enables trading and settlement to clear in under 100 milliseconds whilst not having any credit risk exposure to an exchange.
All assets under Copper’s client segregated custody and traded through ClearLoop are protected with award-winning multi-party computation (MPC) wallets. Copper’s clients are also covered by a full crypto crime insurance policy, provided by A+ rated insurers and tailormade for digital assets.*
Anatoly Crachilov, CEO of Nickel Digital Asset Management, says: “We are very pleased to see Copper and Deribit partnering to introduce ClearLoop which will enable us to mitigate settlement risks and eliminate confirmations-related delays, thus boosting capital efficiency and taking advantage of a greater variety of trading opportunities.”
Dmitry Tokarev, Founder and CEO of Copper, says: “Over the past few months, we have seen extremely unusual price action in both traditional and cryptoasset markets, brought about by COVID-19. And they continue to act in unprecedented ways. The Bitcoin halving, due to happen on the 11th May, will undoubtably bring about some more unusual shifts and result in higher volumes being traded.
“However, this volatility has always been the popular appeal of crypto for investors – not a deterrent. If you ask crypto traders what the weakest links in the marketplace really are, they will say the risk associated with moving assets onto exchanges, and the time it takes for a transaction to settle and clear.
“We worked with asset managers and exchanges for over a year to develop a solution to the three key market issues. ClearLoop, the fruit of this collaboration, allows investors to settle trades instantly, keeps their assets secure and insured in third-party custody, removing concerns about self-custody, all the while eliminating counterparty risk and the associated limitations with volume.
“ClearLoop will help cryptoassets to graduate into the mainstream market, allowing institutions to trade, buy and sell crypto exactly how and when they want to.”
John Jansen, Co-Founder and CEO of Deribit, says: “Integration with ClearLoop is a natural next step for Deribit, as it could potentially solve some of the most critical issues faced by the derivatives market.
"The crypto derivatives market is characterized by high leverage, significant volatility, and complex market structure. Collateral should be able to move fast, cheap, and frictionless and, if possible, without Blockchain network congestion.
"Reducing settlement time for transfers to a few milliseconds without Blockchain network dependency (instant confirmation) and offering enhanced security measures, will reduce risk significantly and will improve the way asset managers trade and manage capital.
"Deribit already serves 85% of the current crypto options market, and our track record has made us the top choice for professional traders. We believe that the ClearLoop will further enhance the derivatives market structure and will drive further adoption of institutional investors."