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BitGo and Copper Launch Off-Exchange Settlement for Deribit Traders

New Partnership Enables Secure Trading with Settlement in Qualified Custody

BitGo, a qualified cryptocurrency custodian, and Copper, the company behind the ClearLoop settlement system, have announced a partnership to provide off-exchange settlement for traders using Deribit, a leading options exchange. This new partnership enables clients of BitGo and Copper to trade spot and derivatives on Deribit while having their assets secured off-exchange in qualified custody with BitGo Trust.

Reducing Risk in a Post-FTX World

In the wake of the FTX collapse, traders are seeking ways to reduce the risks associated with leaving assets on exchanges. BitGo and Copper’s partnership addresses this concern by providing a solution that keeps assets in a regulated, ring-fenced environment, while still allowing traders to access the benefits of decentralized finance (DeFi) markets.

How the Solution Works

The combined BitGo and Copper ClearLoop networks enable delivery versus payment (DvP) settlement, allowing any BitGo client to settle with another BitGo client in an atomic swap of assets without ever bringing those assets on-chain. This process is facilitated by Copper’s ClearLoop system, which ensures the secure and efficient transfer of assets between parties.

According to Brett Reeves, head of BitGo’s Go Network, the solution can eliminate settlement risk, also known as Herstatt risk, by using cold storage and eliminating the need for assets to be brought on-chain. “We can do this DvP settlement from cold storage, and there are no fees for it,” Reeves explained. “So, we’re really looking at eliminating that settlement risk and moving it towards the traditional finance space.”

Technical Details

Under the hood, assets are held in qualified or regulated custody at BitGo, and at pre-defined intraday settlement periods, the assets owed to Deribit are removed from a BitGo account and moved into the Copper ecosystem through to Deribit. If these assets are owed to the client, they are returned the other way, Reeves explained.

“The bulk of the client’s assets remain within BitGo custody, apart from a settlement time when they move to exchange,” Reeves said. “At settlement time, that’s the P&L that they owe on the transactions, or the variation margin on their positions.”

CEO’s Perspective

“The synergies between our companies will unlock new opportunities for investors and will completely change the landscape of trading,” said Luuk Strijers, CEO of Deribit, in a statement.

FAQs

Q: What does this partnership mean for traders?
A: This partnership enables traders to trade spot and derivatives on Deribit while having their assets secured off-exchange in qualified custody with BitGo Trust, reducing the risk associated with leaving assets on exchanges.

Q: How does the settlement process work?
A: The combined BitGo and Copper ClearLoop networks enable DvP settlement, allowing any BitGo client to settle with another BitGo client in an atomic swap of assets without bringing those assets on-chain.

Q: What is the benefit of this solution?
A: This solution eliminates settlement risk, also known as Herstatt risk, by using cold storage and eliminating the need for assets to be brought on-chain, making it a more secure and efficient way to trade.

Q: What is the current state of the trading landscape?
A: In the wake of the FTX collapse, traders are seeking ways to reduce the risks associated with leaving assets on exchanges, making this solution a critical step in providing a more secure and efficient trading environment.