Copper’s new trading tool ClearLoop lets institutional investors from trading more freely by letting two parties hold on to their assets until just before executing a trade.
Copper’s ClearLoop facilitates fast, off-exchange settlements while negate the risk involved with trusting an exchange to look after their trading capital.
We’re excited to launch ClearLoop, a secure & efficient framework for traders to instantly settle crypto trades off-exchange. Huge thanks to @DeribitExchange & @NickelDigital, who have been strong partners working with us over the course of the past year.https://t.co/9TWmIZwATs — Copper (@CopperHQ) May 14, 2020
For institutional investors the problem of having to trust an exchange to look after their capital precludes many of them from depositing and trading as much as they may otherwise like.
Copper CEO Dmitry Tokarev said:
“This is a massive problem in the sector.”
Tokarev added:
“Not only do they not have the capacity to do that assessment, more often than not it’s not the investors’ field [so] it’s hard for them to do it in the first place.”
Usually, credit risk exposure was always the main concern investors had with the cryptocurrency space.
What ClearLoop does is remove this trust element from exchanges. Clients hold their trading capital themselves, either in a cold wallet or custodial solution, while they initialize a trade with an interested party.
Once the trade has actually been completed, ClearLoop transfers digital assets from the client onto the exchange and then into the buyer’s possession.
Not only does this keep the time the exchange holds a digital asset to an absolute minimum, it radically speeds the trading process. Copper claims ClearLoop takes transaction times down to about 100 milliseconds.
Usually, it can sometimes take up to an hour for an exchange to just register a deposit in the first place.
So far six exchanges have integrated it into their trading platforms including Bitfinex, DeversiFI and options exchange Deribit.
We're announcing our integration with ClearLoop by @CopperHQ! An integrated external custody solution that offers off-exchange settlement is a game-changer for bringing institutions into crypto! Learn more about Clearloop and the integration here – https://t.co/26qJhtu2aQ pic.twitter.com/TBr5ZqjS2L — Deribit (@DeribitExchange) May 14, 2020
In a statement, Deribit co-founder and CEO John Jansen said the trading tool would:
“reduce risk significantly and will improve the way asset managers trade and manage capital.”
Tokarev said faster settlement capabilities on multiple exchanges would also create many new opportunities for arbitrageurs while stating:
“If you see an opportunity between two exchanges, you deploy the capital and you collapse that basically instantly, in milliseconds.
He added that a handful of high-frequency trading firms have expressed interest in ClearLoop because it enables them to execute the same strategies they use in traditional assets for crypto.