How do you find a crypto OTC counterparty?

You find a crypto OTC counterparty through one of six channels: a regulated OTC desk that trades with you as principal, an agency broker who finds the other side for you, the OTC or block-trading service of an exchange, a request-for-quote platform that connects you to several liquidity providers, an introducer or your own network, and peer-to-peer groups and chat rooms. What separates the six is who ends up on the other side of your trade and who has verified that party before you deal.

Reaching a desk takes an afternoon. What takes time is the onboarding between the first contact and the first trade, and each channel asks something in return: documents, time, a spread, a commission, or exposure to a party nobody has checked.

"OTC" stands for over the counter: a trade agreed directly between two parties, away from a public order book, at a negotiated price. The rules for the firms offering it vary by country, and this article says where. It is general information, not legal advice.

What are the channels for finding a crypto OTC counterparty?

Six channels lead to a crypto OTC counterparty, and they differ on three points: who you face on the trade, who vetted that party, and how large a trade has to be before the channel will take it. The table sets them side by side on those three criteria.

Minimum sizes are given in words on purpose: each firm sets its own threshold and changes it with market conditions. Ask for it on the first call.

Two of the six channels are not counterparties at all: an agency broker and an introducer lead you to someone else, and you only know who you face when they name that party.

How do the six channels compare on speed and cost?

The channels that onboard you most thoroughly are the slowest to a first trade and the quickest afterwards, while the channels with no onboarding are quick the first time and cost you in exposure instead of fees. Cost has two parts: what you pay in money and what you give up in kind.

The last column is where channels that look cheap turn out not to be. A request sent to several providers tells each of them that a holder wants to sell, and a broker who calls round the market does the same on your behalf. Information leakage is the name for this effect: the market learns of your intention before you have traded, and prices may move against you.

What is the difference between a principal and an agent in OTC trading?

A principal trades with you from its own book and is your counterparty; an agent arranges a trade between you and someone else and is never the other side. The distinction decides who owes you the money or the asset, how the firm is paid, and whose price you are getting.

A desk acting as principal quotes a price at which it will buy or sell for its own account, takes the position onto its book and manages it as it sees fit. Its income is the spread, the gap between the price it gives you and the price at which it can cover itself. You face one known firm, and the risk of price movement after the trade is the desk's, not yours.

An agent works for a commission. An agency broker takes your order, looks for a party willing to take the other side and brings the two of you to an agreement. The trade is between you and that party, so the risk that the party fails to perform stays with you.

European law draws the same line in its own vocabulary. The Markets in Crypto-Assets Regulation of the European Union, known as MiCA, defines the exchange of crypto-assets for funds as the conclusion of purchase or sale contracts with clients "by using proprietary capital", which is principal dealing. It defines separately the execution of orders on behalf of clients, and the reception and transmission of orders to a third party for execution, which are the two forms of agency. A firm may be authorised for one service and not the others, so the label "OTC desk" on a website does not tell you which role the firm is permitted to play.

Some firms act in both capacities, and some as "riskless principal": they agree a trade with you only once the offsetting trade is lined up. None of this is improper. What matters is that you are told in writing, before the trade, which capacity applies to your order, and that the trade confirmation states it.

How do you check that a desk or broker is authorised?

You check a desk's or a broker's status on the public register of the authority that supervises it, under the exact legal name of the entity that will sign your agreement.

The international baseline comes from the Financial Action Task Force, whose standards require countries to license or register virtual asset service providers and to supervise or monitor them. Each country applies that in its own way, so the register to consult depends on where the firm is established.

• European Union. The European Securities and Markets Authority publishes a MiCA register that includes the authorised crypto-asset service providers and, separately, entities found to be providing crypto-asset services without complying. A record of a withdrawn authorisation stays in the publication.
• United Kingdom. The Financial Conduct Authority requires firms that provide cryptoasset services to register with it under the Money Laundering Regulations, and adds registered firms to its Financial Services Register.
• United States. The Financial Crimes Enforcement Network keeps a public search of registered money services businesses. Its own notice says that inclusion is not a recommendation, a certification of legitimacy or an endorsement of the business by any government agency. State licensing is a separate matter.

Three limits apply to every register. A registration for anti-money-laundering purposes says nothing about a firm's financial strength or its prices. The entity on the register must be the entity on your contract, not a sister company with a similar name. And an agency broker, an introducer or a peer met in a group may hold no registration at all, because the activity is not regulated where they sit or because they have not sought one: ask which it is.

What does an OTC desk ask before it quotes?

Before it gives a firm price, an OTC desk asks who you are, who owns and controls you, where the assets or the money came from, and who is authorised to trade. A desk may give an indicative price to a prospect, but a price it will honour comes after onboarding.

The documents vary by jurisdiction and by firm. In general terms, a corporate or fund client should expect to be asked for the following.

• Entity documents. A certificate of incorporation or its equivalent, the constitutional documents, and a recent register of directors.
• Ownership and control. The chain of ownership up to the individuals who ultimately own or control the entity, with identity documents and proof of address for each of them and for the directors.
• Authority to trade. A board resolution or a signatory list naming the people who may give orders and the people who may give settlement instructions. They are often different people, and a well-run desk will want them to be.
• Source of funds and source of wealth. Where the specific assets in the trade came from, and how the owner built the wealth behind them. For crypto, this usually means the acquisition history: purchase records, the wallets involved, and sometimes an analysis of the onchain history of those wallets.
• Settlement details. The bank accounts, in the name of the entity, and the wallet addresses you will use, which the desk records and screens before any trade.

A desk that asks all of this is doing what its regulator expects, and a firm that verifies its clients is a firm whose other clients have been verified. Prepare the pack before the first call: the most common cause of delay is the client's missing document, typically proof of the origin of assets acquired years earlier.

What does each channel require for the same position?

For the same position, the six channels ask for very different amounts of time and money: in the worked example below, the explicit cost of one sale runs from $7,200 to $45,000 and the time to a first trade from one to 15 business days. Every figure in this section is illustrative, chosen to show the mechanics, not taken from market data.

The example: a corporate treasury holds a position in a large, liquid crypto asset worth $6,000,000 at the reference price and wants to sell it for US dollars. It has no trading relationship with anyone. One basis point is one hundredth of one percent, so one basis point of $6,000,000 is $600.

The cheapest line is not the answer by itself. The peer-to-peer row shows no cost because its cost is of another kind: whichever side delivers first is exposed for the full $6,000,000 until an unverified party performs. The request-for-quote row is the lowest among the vetted channels because several providers compete on the same request, after the longest preparation of the six. The introducer row is the most expensive at 75 basis points in total, six and a quarter times the request-for-quote cost; the fee is poor value when that desk takes new clients directly.

Time runs the other way. The chart gives the business days assumed from first contact to first trade for a treasury starting from nothing.

How do you make a first approach to an OTC desk or broker?

A first approach to an OTC desk or broker is made in writing, from a corporate address, with the size band and the pair stated and the direction held back until a confidentiality agreement is in place. Approaching two or three firms in parallel is normal and expected.

What questions should you ask on the first call?

On the first call, ask the questions that establish the firm's capacity, its price, its process and its limits, and note which answers come without hesitation. A firm that trades in size every day has heard all of them.

• Capacity. Do you act as principal or as agent on my trade, and will the confirmation say so? If as agent, when do I learn who my counterparty is?
• Legal entity and supervision. Which entity will I contract with, where is it established, who supervises it and for which services?
• Price. How is your quote built: against which reference price, at what moment, with what spread or commission? Are there any other charges, such as custody, withdrawal or banking fees?
• Quote validity. Is the price you give indicative or firm, how long does a firm quote hold, and what happens if the market moves while I confirm?
• Size. What is your minimum trade, and above what size would you work the order in several pieces instead of quoting it whole?
• Onboarding. What documents do you need, who reviews them, and how long does approval usually take once the file is complete?
• Settlement. Who delivers first, within what time, to which accounts, and how are those accounts verified? Do you need assets or funds placed with you before the trade?

When is an introducer or a personal network the right route?

An introducer or a personal network is the right route when the counterparty you need does not take unknown clients, or when the asset is too unusual for a standard desk. An introduction opens a door; it does not replace the counterparty's onboarding or your own checks.

A fund administrator, a custodian, a law firm, a banker or another holder who has already traded can tell you who quoted fairly and who settled on time, which no register records. For a large position in a thinly traded token, a personal introduction may be the only way to find natural interest without advertising the position.

Three rules keep the route sound. Ask the introducer how they are paid and by whom. Put the fee in writing before the introduction: the amount or percentage, the trades it covers, the period, and who pays. And check whether the introducer needs an authorisation where they operate, because arranging deals for a fee is a regulated activity in some jurisdictions and not in others.

Paying the fee is a mechanical question once the trade is agreed. Where an introducer's or a broker's fee is to be taken out of one payment and shared among several parties, a payment router such as Shaka can carry that single payment: each party's share is set as a percentage and can be signed by the recipient before the payer pays, the payer pays once, and every party receives their share at the same moment. A router divides one payment; it does not exchange the two assets of the trade and is not a settlement or custody service, so the trade itself is still settled under the terms agreed with the counterparty.

What are the exposures of peer-to-peer groups and chat rooms?

Peer-to-peer groups and chat rooms expose a holder to three things at once: a counterparty whose identity is unverified, a settlement with no agreed framework, and assets or funds whose origin nobody has examined. They can lead to a real counterparty, but every control a desk would have applied becomes yours to apply.

Identity comes first: a profile in a group is not a legal person, and the party who negotiates may not be the party who pays. Settlement comes second: two strangers have no agreement on who delivers first, which is why parties who meet this way usually bring in a regulated third party, such as a desk acting as principal between them or an escrow agent. Provenance comes third: money from an unverified payer, or assets from wallets with an unexamined history, can later be questioned by your own bank, exchange or auditor.

Which warning signs call for a pause?

The warning signs that call for a pause all have the same shape: a request that removes a control you would normally rely on. Each is a reason to stop and verify through an independent route, and none is proof of bad faith on its own.

• Urgency without a reason. Pressure to trade today, before onboarding or before documents are exchanged.
• A price better than the market for no stated cause. A discount on a liquid asset has to be explained by something: size, lock-up, or a risk you have not been told about.
• An entity that does not match. The name on the contract, the bank account and the register are not the same legal person.
• Contact details that move. A request to continue on a personal messaging account, or settlement instructions that change shortly before the trade.
• Payment before service. A fee, a deposit or a "test transfer" of meaningful size requested before any agreement is signed.
• Reluctance to be verified. No onboarding asked of you, or a refusal to answer the capacity and supervision questions in writing.

Which channel suits which holder?

The channel that suits a holder depends on three things: how often the holder will trade, how liquid the asset is, and how much time there is before the first trade. No channel wins on all three.

• A one-off sale of a liquid asset, with a few weeks in hand. A regulated desk acting as principal gives one counterparty, one price and one onboarding. Approach two so that you have a comparison.
• Regular conversions by a treasury or a fund. The onboarding effort of a request-for-quote platform, or of two or three desks kept in parallel, pays back on every later trade through competing prices.
• An existing account at a large exchange. The venue's OTC or block-trading service is usually the fastest vetted route, provided you are comfortable holding the assets or the cash at the venue around the trade.
• A large position in a thinly traded asset. An agency broker or a well-chosen introducer, who can look for natural interest discreetly, often serves better than a principal desk that would have to price in the difficulty of unwinding the position.
• No time at all. No vetted channel is instant for a new client. Begin onboarding with the fastest vetted channel available and trade later.