The Dawn of a New Era in Crypto Trading Security
In a significant development for institutional crypto traders, BitGo and Copper have announced a groundbreaking collaboration that promises to transform how assets are secured and settled when trading on Deribit, one of the leading cryptocurrency derivatives exchanges. This partnership represents a major step forward in addressing one of the most pressing concerns in the post-FTX landscape: reducing counterparty risk while maintaining trading efficiency.
Understanding the Innovation: Off-Exchange Settlement
The new solution combines BitGo’s qualified custody services with Copper’s ClearLoop settlement system to create a seamless trading experience that keeps assets secured off-exchange. Here’s how it works:
1. Assets Remain in Qualified Custody: Traders’ digital assets stay within BitGo Trust’s regulated custody environment rather than sitting on an exchange wallet.
2. Automated Settlement Process: The integration with Copper’s ClearLoop enables automatic settlement of trades executed on Deribit.
3. Cold Storage Security: The partnership enables delivery versus payment (DvP) directly from cold storage—a significant security enhancement.
4.Fee-Free Settlements: As highlighted by Brett Reeves, head of BitGo’s Go Network, the solution eliminates settlement fees while reducing Herstatt risk (the risk that one party fails to deliver assets).
The Technical Mechanics
The underlying process is elegant in its simplicity but powerful in its implications. During pre-defined intraday settlement periods, only the necessary assets move between systems:
– Assets owed to Deribit transfer from BitGo accounts into the Copper ecosystem
– Profits or variation margin owed to clients flow back into their BitGo custody accounts
– The bulk of a client’s holdings remain secured in BitGo’s qualified custody throughout
This represents a fundamental shift from traditional exchange-based custody models, where traders must deposit significant assets directly on exchanges to trade.
Why This Matters: The Post-FTX Context
The collapse of FTX in late 2022 sent shockwaves through the crypto industry and highlighted the dangers of keeping large amounts of digital assets on centralized exchanges. This partnership directly addresses those concerns by:
– Reducing Counterparty Exposure: Minimizing the amount of time assets spend outside of qualified custody
– Enhancing Security: Leveraging BitGo’s institutional-grade security infrastructure
– Maintaining Trading Flexibility: Allowing traders to maintain positions without compromising on security
As Luuk Strijers, CEO of Deribit, noted in the announcement, “The synergies between our companies will unlock new opportunities for investors and will completely change the landscape of trading.”
Broader Industry Implications
This development doesn’t exist in isolation—it’s part of a broader trend toward more sophisticated infrastructure in crypto markets:
1. Institutional Adoption: The solution addresses key concerns that have prevented some institutional players from fully entering crypto markets.
2. Market Interoperability: Ben Lorente, director of strategic alliances at Copper, emphasized how this partnership represents “a significant step toward greater interoperability in the market.”
3. Competitive Positioning: For BitGo, which recently surpassed $100 billion in assets under custody, this partnership reinforces its position as a leading institutional crypto service provider.
BitGo’s Growing Ecosystem
This announcement follows several strategic moves by BitGo:
– The launch of a global OTC trading desk serving institutional clients
– Expansion of trading capabilities across more than 250 assets
– Development of complementary services including lending and hedging solutions
These initiatives collectively demonstrate BitGo’s evolution from a pure custody provider to a comprehensive financial services platform for digital assets.
Looking Ahead: The Future of Institutional Crypto Trading
The BitGo-Copper partnership signals a maturing crypto ecosystem that increasingly resembles traditional financial markets in terms of settlement processes and risk management—while maintaining the distinctive benefits of blockchain technology.
For institutional traders, the ability to trade derivatives with reduced counterparty risk represents a significant advancement. As more exchanges and service providers adopt similar models, we can expect to see:
– Further reduction in centralized exchange risk exposure
– More sophisticated trading strategies enabled by secure infrastructure
– Increased institutional comfort with crypto derivatives markets
– Greater overall market liquidity as institutional barriers to entry are lowered
A Step Forward for the Industry
The collaboration between BitGo and Copper to provide off-exchange settlement for Deribit traders represents more than just a new product offering—it signals the ongoing maturation of crypto market infrastructure.
By addressing the fundamental tension between trading convenience and asset security, this partnership helps move the industry beyond some of the painful lessons of 2022 and creates a more resilient foundation for the next phase of institutional crypto adoption.
As traditional finance and digital asset markets continue to converge, innovations like this will play a crucial role in building the bridges that allow institutional capital to flow more confidently into crypto markets.
Check Crypto New Today for the latest updates onBitGo and Copper have partnered to provide off-exchange settlement for Deribit traders, allowing clients to trade spot and derivatives while keeping assets secured in BitGo’s qualified custody, with automatic settlement through Copper’s ClearLoop system – a major security advancement in the post-FTX era where traders seek to minimize exchange-held assets.
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