Hundreds of Millions of Dollars in Crypto Trades Daily Over Skype

The trading of crypto is moving away from already volatile crypto exchanges to Skype in order to cater to big investors looking to avoid rocking the ship.

Unnamed participants told Reuters that some 20 traders as well as clients such as wealthy investors, miners, payment processors and, increasingly, hedge funds, have in around five years spawned an over-the-counter (OCT) market moving hundreds of millions of dollars in crypto daily. This market mostly takes place via online instant messaging apps such as Skype.

Kevin Zhou, founder of cryptocurrency-focused hedge fund Galois Capital, explained: “Generally, you would go trade through an OTC desk when you have a large block trade you want to do without moving the market too much or incurring too much slippage.”

It is not a small market either: some dealers said their desks often handle more than USD 100 million of cryptocurrency trades daily with minimum ticket sizes between USD 75,000 and USD 250,000, as these trades are not reported and independently audited. This is also the go-to solution to those who are afraid of hacks and security issues targeting big exchanges but still want to trade.

However, while business is growing, OTC desks are grappling with an absence of clear rules from regulators. To make up for this, they must introduce their own KYC (Know Your Customer) and AML (Anti Money Laundering) rules and record trader-client conversations. Many encourage regulators to work with participants to fully understand the market and the implications of any new laws and rules.