Over the Counter Crypto Exchange License

An OTC trading platform can function either as a separate entity or as part of a cryptocurrency exchange. Such famous exchanges as, for example, Binance or Kraken, have their own inbuilt OTC trading services. Regardless of your particular project type, you will have to concern yourself with providing enough liquidity for successful trades. 

Quite often, traders themselves can participate in deepening the liquidity, acting as market makers and benefitting from the price gaps between OTCs and traditional exchanges at the same time. High liquidity, which often pertains to OTC platforms, is the consequence of large trading orders being predominant in over-the-counter trading. It allows OTCs to provide trading services without altering or gravely impacting market prices.

One of the widely perceived benefits of OTC platforms over traditional exchanges is the reduction of potential slippage. Slippage refers to the difference between the expected price and the actual price that results from a trading deal and can commonly take place when the market price drops in the transaction process. 

Controlling slippage on an OTC platform is fairly simple since they are not subject to constant market fluctuations and changes in prices. Since all the deals are executed directly between buyers and sellers, on their pre-negotiated conditions, no risk of slippage arises.

OTC trading platforms are more private and less transparent than traditional exchanges, and this is exactly why they are in close focus of the regulators around the world. Such transactions, completed in full privacy and on terms negotiated between two anonymous parties, are largely viewed by the higher authorities as potentially fraudulent, money laundering, or even financing terrorism. 

Henceforth, AML-CFT compliance and regular reporting are mandatory. Regardless of the need for licensing, in order to run an OTC exchange legally, you will have to apply certain AML compliance measures. The full compliance document package, as well as basic AML-CFT training for the key shareholders of your startup, can be provided by LegalBison.

Over the counter crypto trading is proven to be a stable trading solution independent from the market. High-net-worth individuals are likely to resort to OTC trading crypto for swift transactions that involve large sums. Depending on the essence of the project, you as a future owner of an OTC crypto exchange might need to license your company. 

Each of the international jurisdictions overseeing the flow of crypto and crypto trading operations has a designated authority issuing licenses or registrations to applicants. While a license is not mandatory, it can highly improve the visibility of your platform on a global scale, as well as its trustability among valuable clients. 

In order to properly analyze the need for a license, we recommend contacting our lawyers who have years of experience in assisting customers with opening their OTC platforms.

Security is the primary aspect of successful crypto OTC trading. Implementing security modules must be one of the primary concerns while building a crypto OTC trading platform from scratch. The most important security measure is, of course, the adherence to AML-CFT policies which will work as solid proof that your OTC platform is not involved in any potentially dangerous activities. 

With or without a license, any OTC crypto exchange that wants to be visible and trustworthy on the market must construct its own AML-CFT compliance protocols, assign a responsible AML officer, and educate the key members and shareholders of the company on the main AML policies. For those who don’t know where to start, LegalBison provides in-depth assistance with AML-CFT protocol integration and uninterrupted compliance.

Apart from AML-CFT compliance, it is vital to ensure a high level of cybersecurity for an OTC cryptocurrency exchange. Since OTC deals crypto involve the circulation of large money sums, potential traders want to be sure that their assets are safeguarded and under control. Besides, in case of a licensing requirement, some regulators demand regular cybersecurity checks and reports from applicants, often conducted by an IT specialist. 

No matter what your goal is, LegalBison can assist you with the technical side of maintaining your cryptocurrency OTC. We can assign a responsible technical specialist to conduct a cybersecurity audit of your platform and assist your project with regular reporting (if required).

Crypto OTC desks can serve multiple purposes apart from straight-up cryptocurrency trading. One of the most prominent features an OTC platform can have is a native OTC stock data API. Thanks to API integration, individuals who use your OTC for trading can integrate OTC desks into their systems and trade assets seamlessly across multiple networks at once. 

API integration requires some extent of technical know-how, which can be too sophisticated and obscure for the beginner owners of OTC trading platforms. If you want to build your own API solution and offer it to clients, contact the tech team of LegalBison for professional assistance.

OTC cryptocurrency trading often requires an all-encompassing banking solution. It can be either a bank gateway for traders who wish to exchange fiat for crypto and vice versa (on-ramping and off-ramping) or a corporate bank account for the company’s needs. Either way, crypto-related platforms, including OTCs, are rather notorious in the eyes of most banks and their reputation remains questionable. 

Henceforth, obtaining a banking gateway can be challenging and take a long time since you will have to prove that your OTC platform is transparent and secure. LegalBison assists newcomer OTC brokers with establishing unwavering compliance from multiple legal standpoints.

The preparation of any crypto OTC platform for launch starts with assessing the need for a license. Depending on the nature of the project, the services included, and the general aspirations of the owner of a crypto OTC desk, our specialists define whether a company requires a license or not. 

Despite the fact that a license is not necessary, it is advisable in many cases to improve the reputation, security, and general trustability of an OTC cryptocurrency broker. If the license is required, our lawyers undertake the procedure and prepare all the mandatory documents as requested by the regulator.

The need for a license is defined, and a team of lawyers starts preparing your OTC trading platform for launch. The procedure usually comprises the following steps:

• Choosing a fitting regulator;

• Shaping up a ready-made company or building one from scratch;

• Preparing the whole package of required documentation;

• Aligning the project with AML-CFT and other compliance requirements;

• Drafting a detailed business plan;

• Arranging the IT infrastructure of the platform;

• Drafting and submitting a licensing application on the client’s behalf.

LegalBison always oversees the process from the very first step until the company is ready to step into the big market.

All OTC crypto brokers, whether licensed or not, must comply with the local AML-CFT policies of the country of their registration. The compliance procedure includes drafting all the necessary compliance documentation, assigning a responsible AML officer, and educating the key shareholders on the AML-CFT guidelines. The best OTC crypto exchange always adheres to the AML-CFT stipulations. 

This is an intricate legal process that requires intervention from a professional lawyer. At LegalBison, we fully undertake the implementation of all compliance procedures, making sure that your OTC exchange is good to go before its official launch.

A stable banking gateway is crucial in many regards. Often, it is needed to streamline on-ramping and off-ramping solutions, allowing clients to trade crypto for fiat and back. At the same time, your company will always need a corporate bank account for its in-house expenses, which might sound like an easy job to get but whenever crypto is involved, most banks get cautious. 

Establishing connections between crypto companies and banks is one of the pillars of LegalBison’s experience. We commit to finding an appropriate banking solution within the timeframe requested by our clients.