Zodia Custody, SBI Alpha, QCP Capital and Clear Markets have conducted the first uncleared crypto derivatives trades in an effort to make the crypto ecosystem safer.
The trades were executed on the Clear Markets platform, with Zodia Custody acting as the holder of the Bitcoin that offset the credit risk of the trade. The risk management was achieved, in part, using the Corda Network developed by R3.
The companies’ current approach applies to a cryptocurrency swap and is automated on a blockchain, while the transactions require collaboration across multiple jurisdictions.
Risks taken by counterparties of FTX and crypto units that have collapsed are eliminated with protections from loss and counterparty bankruptcy. Collateral is in place at the time of trade and bolstered with real-time payments.
The companies say that the exercise represents a “significant step in pioneering better ways to manage credit risk for the derivatives community”.
Kentaro Kuba, president of SBI Alpha Trading, a subsidiary of SBI Holdings, says: “Custom-tailored crypto derivatives are a market segment with huge potential because they allow traders to assume or hedge exposure to crypto without holding the tokens.”
Darius Sit, founder of QCP Capital, comments: “This carefully structured approach to crypto derivatives credit risk management is timely where players seek to integrate best practices from both traditional and crypto markets.”
