Berlin-based Swarm Markets GmbH, the first regulated decentralised financial infrastructure provider, announces it will launch a peer-to-peer contract for high value transactions in Q1 2022.
The so-called dOTC service empowers institutions and professional investors to use the first regulated crypto block-trade smart contract in place of traditional over-the-counter (OTC) trading.
High volume swap activity has increased significantly in the past year. According to a report by Messari Hub, the number of unique traders executing trades over $500k has increased by 140% from March to September, 2021. However, to date, there is no block-trade P2P smart contract available to institutions that removes counterparty risks.
Timo Lehes, co-founder of Swarm Markets, said: “Because Swarm Markets is regulated to the same degree as any other German financial institutions, dOTC users can trust our infrastructure to carry out block trades with verified counterparties only. For the first time, institutions with a fiduciary responsibility now have a compliant trading tool they can use to minimize or remove crypto slippage.
“Crucially, our trading infrastructure preserves the architecture and innovation of DeFi with the reassurance of regulation. dOTC preserves elements like self-custody, so participants have control over their assets at all times.”
Carrying out an OTC trade is typically a complex process, requiring costly intermediaries who participants need to trust and who charge substantial fees in return for guaranteeing the safety of a trade.
Swarm Markets’ dOTC smart contract eliminates the need for intermediaries and has designed the process in a trust-less way. The dOTC contract enables platform users to safely execute a buy or sell order directly with other platform users in minutes instead of days or weeks—and for a tiny fraction of the price.
The dOTC contract can be used for a wide range of digital assets, from ERC20 to ERC721/1155, enabling participants to buy high value NFTs and to facilitate smoother liquidation of crypto positions. dOTC will also enable contract-based block trades for upcoming regulated digital securities, further extending the cost savings available to high volume traders.
Phlipp Pieper, co-founder of Swarm Markets, added, “The timing of this announcement is crucial as institutions have very few, if any, viable and trusted trading tools in DeFi to help ride out crypto volatility. We tend to see more volatility in crypto markets in the months of December and January, resulting in high slippage for larger trades.
“Swarm Markets is in a unique position to offer decentralized trading infrastructure in both crypto and traditional financial products. This contract will become a key feature for institutions to support bulk selling and buying of securities on chain, using Swarm Markets DeFi infrastructure, launching in Q1 2022.”
Swarm Markets’ dOTC service will be open to all users who have onboarded to the platform. Swarm Markets will communicate the list of assets eligible for dOTC trading in the coming weeks.