Square Quietly Pivots Its Bitcoin Trading Service To Operate Through Private Brokers Instead Of Public Exchanges
While Square's Bitcoin service isn't known for it's upstanding profitability just yet, it's little-known pivot, they hope, will change this state of affairs.
In its recent quarterly report, Square announced its now moved trading away from public exchanges, in order to use “private broker dealers” as an alternative for its cash app, the system responsible for the majority of its Bitcoin transactions.
What this means is that the majority of Square's trading of bitcoin originates from private, Over the Counter exchanges instead of public ones.
The reason for the move? Square believes that this will allow the platform to become a more secure, professional service, according to Cryptocurrency experts. Through going private, Square will be able to create a faster, more secure platform, providing less in the way of market volatility when it comes to pricing Bitcoin.
When approached for a comment on this move, Square declined to do so.
The CSO of Coinshares, Meltem Demirors, stated that: “Working with a broker likely gets Square better pricing and better execution services than floating orders on the open market, as well as more confidentiality.”
Unlike private exchanges, public exchanges, in being more open, find themselves increasingly susceptible to hackers, which is evident through the increasing number of instances where exchanges have been subject to some scale of cybersecurity threat, totalling in the tens of millions of dollars.
Also, most exchanges have open order books, giving competitors room to track transactions and exploit them.
Hunter Horsely, speaking on behalf of Bitwise Asset Management as its CEO, beleived that there were a number of good reasons as to why Square moved to an OTC, private system, specifically the fact that the system would run faster on account of not needing a requisite amount of cash being deposited in order to complete a transaction.
“There are many merits to trading OTC, which might be motivating Square's switch.” – Hunter Horsley.