Deribit Crypto Exchange and ClearLoop Partner to Prevent Auto Deleveraging (ADL) In Volatile Markets
- Panama based cryptocurrency derivatives exchange, Deribit, announces the launch of an external custody solution in partnership with ClearLoop, a London based digital asset infrastructure provider.
- The solution aims to reduce the auto deleveraging (ADL) on the platform while enhancing the collateral transfer between wallets.
According to the release statement, this is expected to open up a more secure gateway for institutional traders to carry out trades without transferring their assets from the cold wallets to online wallets every time they wish to trade.
The account which is a custody account aims at preventing asset managers from being forced to move their crypto to hot wallets from secure storage. Transfers not only cause issues with the security of crypto assets, as they can be stolen or sent to the wrong wallet, but any delay in the transfer can cost the traders money. This is dependent on the time required for confirmation.
ClearLoop’s solution will employ a secure and quick system through intermediate clearloops providing managers with a secured custody solution. In addition, it eliminates self-retention risks on the platform.
For each position that a trader presents, ClearLoop first ensures that the exchange and the client both have enough assets to cover them before they open them. ClearLoop also ensures that the same has been settled between them as soon as the deal has been closed.
In relation to a number of market inefficiencies, ClearLoop claims that by faster transfer of customer guarantees, traders will be better protected from the risks of automatic debt reduction.
Co-Founder and CEO of Deribit, John Jansen said,
“Integration with ClearLoop is a natural next step for Deribit, as it could potentially solve some of the most critical issues faced by the derivatives market.”
Traders can get higher volumes per transaction by enabling shorter response times while at the same time avoid cryptocurrency value restrictions which can be stored in hot wallets. These are needed to minimize counterparty and security risks. ClearLoop argues that with its new solution, all deposits, and counter deposits that are secured in the cold wallet storage until allowing instantaneous trades across the blockchains.
We're announcing our integration with ClearLoop by @CopperHQ!
An integrated external custody solution that offers off-exchange settlement is a game-changer for bringing institutions into crypto!
— Deribit (@DeribitExchange) May 14, 2020