BitGo and Copper Enhance Off-Exchange Settlement for Deribit Traders
In a significant development, qualified cryptocurrency custodians BitGo and Copper have joined forces to provide a robust off-exchange settlement solution for traders engaging with the options exchange Deribit. This partnership, announced on Thursday, aims to enhance the trading experience by ensuring that assets remain secure while facilitating transactions.
Through this collaboration, clients utilizing the services of BitGo and Copper can seamlessly trade both spot and derivatives on Deribit. Their assets will be held securely off-exchange in a regulated custody environment managed by BitGo Trust. The settlement process leverages Copper’s ClearLoop and the Go Network, as detailed in a recent press release.
In the aftermath of the FTX collapse, traders are increasingly seeking ways to mitigate the risks associated with leaving their assets on exchanges. BitGo and Copper initially announced their partnership two years ago, aiming to allow trading on exchanges while keeping assets protected within a regulated custody framework.
A key feature of the integrated BitGo and Copper ClearLoop systems is the delivery versus payment (DvP) mechanism. This allows any client of BitGo to instantly settle transactions with other BitGo clients through atomic swaps of assets, eliminating the need to bring those assets onto the blockchain. According to Brett Reeves, head of BitGo’s Go Network, “We can execute this DvP settlement directly from cold storage, and there are no fees associated with it.” He emphasized that this innovation significantly reduces settlement risk, often referred to as Herstatt risk, and aligns cryptocurrency trading more closely with traditional finance practices.
Underpinning this process, the assets are securely held in a qualified or regulated custody at BitGo. During predefined intraday settlement periods, assets owed to Deribit are transferred from a BitGo account into the Copper ecosystem. Conversely, if these assets are owed to the client, they are returned to the BitGo account. “The majority of the client’s assets remain within BitGo custody, with only a temporary transfer occurring at settlement times,” Reeves clarified. “At the time of settlement, we address the profit and loss owed on transactions or the variation margin related to their positions.”
Luuk Strijers, CEO of Deribit, expressed optimism about the collaboration, stating, “The synergies between our companies will unlock new opportunities for investors and will fundamentally reshape the trading landscape.”
