In this article
You become a crypto OTC broker by doing three things in order: settling under which licence or registration you are allowed to arrange trades for a fee, building a network of buyers and sellers whose mandates you have verified yourself, and signing a fee agreement with the paying party before you introduce anyone. No exam and no single diploma makes someone a broker; what does is a legal footing, a book of real counterparties and a record of trades that closed.
"OTC" stands for over the counter: a trade agreed directly between two parties, away from a public order book, at a negotiated price. The broker in that market is an agent. The broker does not buy or sell from an inventory, as a principal desk does, and is paid a fee for finding the other side and carrying the deal to agreement.
This article is about the individual's path into that role. The rules on who may arrange a crypto trade for a fee differ by country and by the nature of the asset, and the article says where. It is general information, not legal advice.
Illustrative figures from the worked example further down: conversion rates, trade sizes and fee rates are chosen for the example, not measured in the market.
What does a crypto OTC broker do?
A crypto OTC broker finds a counterparty for a client who wants to buy or sell a large position, helps the two sides reach agreed terms, and is paid a fee when the trade completes. The broker acts as an agent throughout: the trade is between the buyer and the seller, and the broker never owns the asset or the cash.
That is the line between a broker and a principal desk. A desk quotes a price and takes the other side of the trade on its own book; it earns the difference between its buying and selling prices and carries market risk while it holds the position. A broker carries no position.
Three roles are often called "broker" in this market, and you should know which one you intend to be, because the regulatory answer changes with it.
- An introducer names one party to another and steps back. The introducer takes no part in pricing, terms or settlement.
- An agency broker receives a client's order, searches for the other side, relays prices and terms, and stays in the conversation until the trade is done.
- A broker attached to a firm does the same work under a licensed desk or brokerage, which is the contracting party towards the client.
The day-to-day work is less about trading screens than about verification. Much of what reaches a broker is not real: chains of intermediaries passing on an order none of them has seen, sizes that grow with every retelling, prices far from the market. Sorting what is real from what is not is the service clients pay for.
Which skills does a crypto OTC broker need?
A crypto OTC broker needs five skills: market literacy, verification, documentation, discretion and patience with long sales cycles. None of them requires a trading background, though one helps with the first.
Market literacy means you can read a quote and explain it. You should know what a bid, an ask and a mid price are, how a spread is expressed in basis points (one basis point is 0.01%), why a large order moves the price on an order book, and why a holder would accept a negotiated price instead.
Verification is the skill that separates a working broker from a message relay. It covers identifying the legal entity and its beneficial owners, confirming that the person you speak to has authority to commit that entity, obtaining evidence that the assets or the funds exist, and screening the parties against sanctions lists. Know what a desk or a custodian will ask, because a mandate that cannot pass their onboarding will not trade.
Documentation means writing down who pays you, how much, when and on what event, and keeping a dated record of every introduction.
Discretion is commercial as much as ethical. A holder who wants to sell a large position quietly is harmed if the market learns of it, and a broker who circulates an order widely will not receive a second one.
Patience is financial. Mandates take months, most fail, and the fee arrives only at the end. The worked example below puts numbers on that.
Does a crypto OTC broker need a licence?
Whether a crypto OTC broker needs a licence depends on the country, on what the asset is, and on what the broker does with client orders and client money; in several major jurisdictions, arranging crypto trades for others as a business is itself a regulated activity. Being paid only on success does not take the activity outside the rules, and in some regimes it points the other way.
The table sets out four regimes as their own texts describe them.
| Regime | Activity it covers | What it means for a broker |
|---|---|---|
| United States, securities law | A broker is any person engaged in the business of effecting transactions in securities for the account of others | Where the asset is a security, arranging trades for a fee generally requires registration as a broker-dealer or association with one |
| United States, money transmission | Accepting currency, funds or other value from one person and transmitting it to another location or person | A broker who takes client funds or assets and passes them on is a money transmitter; registration is due within 180 days of starting |
| European Union, Markets in Crypto-Assets Regulation | Ten crypto-asset services, among them receiving and transmitting orders, executing orders, placing and advising | Providing any of them on a professional basis requires being allowed to do so under the regulation, and the provider is a legal person or other undertaking |
| United Kingdom, Money Laundering Regulations | Exchanging cryptoassets for money, or arranging or making arrangements with a view to that exchange, by way of business | A firm or sole practitioner doing so must register with the Financial Conduct Authority |
On the first row, the Securities and Exchange Commission's guide to broker-dealer registration lists four questions: whether you take part in soliciting, negotiating or executing a transaction; whether your compensation depends on the transaction or its size; whether you are otherwise in the business of effecting or facilitating securities transactions; and whether you handle the securities or funds of others. According to the guide, a yes to any of them indicates that you may need to register, and it adds that people who call themselves finders may need to register depending on what they do.
On the second row, the Financial Crimes Enforcement Network's 2019 guidance on convertible virtual currency draws the line at handling value. It treats a platform that only provides a forum where buyers and sellers post bids and offers, and where the parties settle between themselves through outside wallets, as not being a money transmitter, while a person who buys from one side and sells to the other is one. The same guidance treats natural persons who buy and sell virtual currency as a business as money transmitters, unless the activity is infrequent and not for profit. State licensing in the United States is a separate layer and varies by state.
On the third row, the regulation defines the reception and transmission of orders as receiving from a person an order to purchase or sell crypto-assets and passing that order to a third party for execution. That is close to an agency broker's daily work.
On the fourth row, the wording covers arranging, not only exchanging, and the definition names sole practitioners alongside firms. The Financial Conduct Authority has announced a wider regime for cryptoasset firms to replace the present one, so check the current position before relying on any summary.
Other countries have their own regimes, and a broker based in one country who serves clients in another may fall under the rules of both.
Should you work independently or under a licensed firm?
Working under a licensed firm gives a new crypto OTC broker a legal footing, a compliance function and a name that counterparties can check, in exchange for a share of every fee; working independently keeps the whole fee and leaves the broker to carry the regulatory question and every cost alone. Most people who last in the role start under a firm or with a firm behind each trade.
| Criterion | Independent broker | Broker under a licensed firm |
|---|---|---|
| Regulatory footing | Your own registration or licence where arranging is regulated, or activity limited to what is unregulated where you operate | The firm's authorisation covers your activity, under its supervision |
| Client onboarding | Done by you, or by the desk or custodian that settles the trade | Done by the firm's compliance team |
| Share of the fee | All of your side of the fee | A payout agreed with the firm, often a percentage of what you bring in |
| Credibility with a new counterparty | Rests on your own record and references | Rests on the firm's public registration and its name |
| Who owns the client relationship | You | Defined by your contract with the firm; read the non-solicitation clause |
| Fixed costs | Legal, screening tools, entity, insurance, all yours | Mostly borne by the firm |
In United States securities law the firm route has a defined form: according to the Securities and Exchange Commission's guide, associated persons of a registered broker-dealer usually do not have to register separately, provided the firm supervises them.
There is a third arrangement between the two: the independent introducer who brings clients to a regulated desk under a written introducer agreement. The desk onboards the client, quotes, trades and settles; the introducer is paid by the desk from its own revenue. Whether introducing alone is regulated still depends on the country, but this is the narrowest version of the role.
Ask a firm four things before joining: which activities and which countries its authorisation covers, the payout and when it is paid after a trade settles, who owns the relationships you bring, and what happens to fees on trades that close after you leave.
How do you build a network of buyers and sellers?
A network of buyers and sellers is built one verified principal at a time, by going where holders and buyers of size already are and by being useful before asking for a mandate. A principal is a party who owns the assets or the funds and decides; an intermediary is anyone standing between you and that party.
Natural sellers of large positions include early holders, project treasuries, investment funds at the end of a fund's life, miners and validators with recurring production, and estates or companies in liquidation acting through their administrators. Natural buyers include funds, family offices, corporate treasuries, trading firms and principal desks, which will often take the other side themselves. Start with one side and one type of party.
The channels are ordinary professional ones:
- Your existing career. Private bankers, fund administrators, lawyers, accountants and treasury staff already know who holds what; many brokers come from those roles.
- Industry conferences, where the operations and trading staff of funds and desks can be met in person.
- Professional advisers who are asked by clients how to sell or buy a position and have no answer of their own.
- Regulated desks, which need introductions and will tell you what size and what client profile they can take.
Every relationship should end with the same question answered: is this person the principal, or how many steps away? If the answer is more than one step, ask to be put in direct contact with the next link, with the fee of each link written down. Long chains rarely close a trade, because each link adds a fee, a delay and a chance for the order to be misdescribed.
Keep a register from the first day: name, entity, role, what was verified and when. It becomes your evidence of who introduced whom.
How do you qualify a mandate before you introduce anyone?
A mandate is qualified when you have confirmed, with documents and not with assurances, that the client is the principal or holds written authority from the principal, that the assets or funds exist, and that the price and size sought can be met in the market. An introduction made before those checks spends your reputation on someone else's unverified claim.
- Identify the principalObtain the legal name of the entity or person who owns the assets or the funds, its registration documents and its beneficial owners. If you are speaking to an intermediary, obtain the written authority that links them to the principal.
- Confirm authorityCheck that the individual instructing you is entitled to commit the principal: a director, an authorised signatory or a holder of a written mandate.
- Ask for evidence of assets or fundsFor a seller, evidence of control of the holdings, such as a custodian statement or a signed message from the address. For a buyer, a bank or custodian confirmation. The evidence is shown, not moved.
- Screen the partiesCheck the entity and its owners against the sanctions lists that apply to you and to the firms that will settle the trade, and note the result with its date.
- Test the terms against the marketCompare the size and the price sought with a public reference price. A discount or premium far from the market needs an explanation you can repeat to the other side.
- Sign before you nameHave the fee agreement and the confidentiality terms signed, then, and only then, disclose the identity of the counterparty.
A mandate that fails one check is not always dead. A real holder may refuse to show evidence of assets to a broker but will show it to a regulated desk during onboarding; in that case the introduction goes to the desk, and the desk does the verification.
Why should the fee agreement be signed before the introduction?
The fee agreement should be signed before the introduction because the broker's whole contribution, the identity of the other party, is delivered at the moment of introduction and cannot be taken back. Once the two sides know each other, a broker without a signed agreement depends on their goodwill.
A workable fee agreement is short and answers eight points:
- Who pays the fee: the buyer, the seller, both, or the executing desk.
- The amount: a percentage of the notional value of the trade, a fixed sum, or a scale that falls as the size rises.
- The event that triggers payment: usually the settlement of the trade, not the introduction and not the signature of terms.
- The base of calculation: the price and the quantity actually traded, with the reference used if the price is set by a formula.
- The parties covered: the counterparties you introduce are named in a schedule that both sides date and sign as each introduction is made.
- The duration and the period after the agreement ends during which a trade between the introduced parties still earns the fee.
- Later trades: whether repeat business between the same two parties earns a fee, at what rate and for how long.
- How and when the fee is paid: the payment route, the deadline after settlement, and the governing law.
Two companion clauses usually travel with it. A confidentiality clause protects what each side learns about the other, and a non-circumvention clause commits the parties not to deal with each other around the broker for a stated period. Neither replaces a dated record showing that you made the introduction.
Disclose to each side who pays you: a broker paid by both parties without telling them invites a dispute.
How is a crypto OTC broker paid, and how is a fee shared with a co-broker?
A crypto OTC broker is paid either a commission stated separately from the price, usually a percentage of the notional value of the trade, or a margin built into the price the client sees, and the agreement says which.
Many trades involve two brokers, one holding the seller's mandate and one holding the buyer's. The usual arrangement is that one fee is charged on the trade and divided between them, in shares written into a co-broker agreement before either names a client. Equal shares are common where each broker brings one side.
Where one fee is to be shared among several brokers, the division itself can be built into the payment. A payment router such as Shaka carries a single payment and divides it: each broker's share is set as a percentage and can be signed by that broker before the payer pays, the payer pays once, and every recipient receives their share at the same moment, in a payment that is final. On a $12,000 fee shared equally between two brokers, each receives $6,000 in the same transaction, and neither waits for the other to forward it. A router divides one payment; it does not exchange the two assets of the trade and is not a settlement or custody service.
What does a realistic first year look like for a new crypto OTC broker?
A realistic first year for a new crypto OTC broker is a long period without income followed by a small number of closed trades, and the net result after costs can be modest. The worked example below is illustrative: every rate and amount is an assumption chosen to show the mechanics, not a market measurement.
Take a broker who approaches 20 new contacts a month, or 240 over the year. Assume 15% of them turn out to be principals, or one step from a principal, and pass the qualification checks; half of those give a live mandate with a size and a price; half of the mandates lead to an introduction that both sides accept; and four of the nine introductions end in a settled trade.
Assumed conversion rates: 15% of contacts qualify, 50% of those give a mandate, 50% of mandates reach an accepted introduction, four of nine introductions close.
The steepest drop is the first one, which is why qualification is the skill that decides the year. Overall, one contact in 60 becomes a closed trade.
Now the money. Assume the four trades close in months 7, 9, 10 and 12, that the fee rate falls as the size rises, and that two of the four are shared equally with a co-broker who held the other side.
| Trade | Notional and fee rate | Gross fee | Broker's share |
|---|---|---|---|
| Month 7, sole broker | $1,500,000 at 0.40% | $6,000 | $6,000 |
| Month 9, co-brokered | $2,500,000 at 0.30% | $7,500 | $3,750 |
| Month 10, sole broker | $4,000,000 at 0.25% | $10,000 | $10,000 |
| Month 12, co-brokered | $6,000,000 at 0.20% | $12,000 | $6,000 |
| Year | $14,000,000 | $35,500 | $25,750 |
The gross fees come to about 0.25% of the notional traded, and the broker keeps $25,750 after $9,750 goes to co-brokers.
An independent broker then pays the year's costs. Assume $6,000 for legal work (the regulatory opinion and the agreement templates), $3,600 for screening and record-keeping tools, $2,400 for the entity, accounting and insurance, and $7,500 for travel and events: $19,500 in all. The net result is $25,750 less $19,500, or $6,250 for the year, with all of the costs running from the first month and no fee received before the seventh.
The same pipeline under a licensed firm gives a different shape. Assume the firm pays out 50% of what the broker brings in and bears the legal, compliance and tooling costs, leaving the broker $3,000 of unreimbursed travel. The payout is $12,875 and the net is $9,875, which is $3,625 more than the independent route in this example, with far less money at risk in the first six months. The comparison reverses as fee income grows, because the independent broker's costs are largely fixed while the firm's half is not.
Two lessons follow from the numbers. A first year should be financed from savings or from another income, not from expected fees. And the second year starts from a different place, because principals who closed once come back without a new search.
How do you build a reputation as a crypto OTC broker?
A crypto OTC broker's reputation is built on trades that settled, on mandates declined for good reason, and on a record that counterparties can check with people they already trust. In a market where anyone can claim a large order, being checkable is the scarce quality.
Start with being identifiable. Use your legal name, a registered entity where you have one, and your regulatory status stated accurately. Desks and custodians verify the people who bring them business.
Say what you have verified and what you have not. A counterparty who discovers that a "confirmed" seller was three steps away will not take your next call. One who was told "I have seen the custodian statement, I have not seen the authority of the signatory" knows what your word covers.
Ask for references only after a settled trade, and from both sides. Two principals and one regulated desk willing to confirm that you behaved correctly are worth more than any presentation.
A broker who is ready for a first mandate can answer three questions from any counterparty without hesitation: under what status the broker acts, who pays the fee and how much, and what has been verified about the party being introduced.
