As cryptocurrency becomes increasingly mainstream, institutional investors and financial heavyweights, such as hedge funds and high net worth individuals, are looking for strategic ways to enter the market. In order to avoid shaking the already volatile crypto market with multi-million dollar trades, these investors often look to over-the-counter (OTC) services to execute large trades outside of the regular exchanges.
The latest such service was launched this month by Wyre, a veteran in the cryptocurrency space that has facilitated over $3.5 Billion in crypto trades since their founding 5 years ago. Though Wyre is no newcomer to the high-value trading game, the launch of their official OTC cryptocurrency desk signals a renewed focus on the OTC market.
We spoke with Michael Dunworth, CEO of Wyre, about the company’s plans and the future of OTC cryptocurrency trading.
First off, tell me a bit about Wyre. What’s the company’s story? What problem do you solve?
MD: Wyre has been around since 2013. Feels like centuries ago! Originally, we started out as a merchant processor/hosted wallet solution for buying, selling, and spending crypto. This was amazing and helped us learn quickly about what direction the industry is heading, what problems are (and aren’t!) being solved, and where we can add the most value.
In late 2015, we beta tested our cross-border product that leverages the infrastructure we’d built for wallets and merchant processing. Essentially people would send us USD and it would show up in (for example) their Brazilian bank account 30 minutes later. This felt really powerful, and we saw a very clear pain point that wasn’t surrounding speculation. So a year later we rolled it cross-border payments as an API that let people have this use-case along with the conversion between crypto. Since then, it’s been heads down trying to bring this value to the traditional players in the space: people like the household name remittance platforms, startups wanting to build exchanges for crypto, traditional fintech apps looking to all of the above.
Wyre is focused on building out FX conversion, and payouts, on top of bitcoin and digital assets. We pull together all the liquidity sources in one spot, and allow people to convert between currencies faster and more cost-effectively because it’s using bitcoin as a medium of exchange (the rails behind the scenes). This captures the advantages of the blockchain — speed, cost, and transparency — without the learning curve or technical hurdles, fast-tracking participation into the industry for both the traditional platforms and the new startups.
Why is now the right time to open an OTC crypto desk?
MD: Given the pullback in the market from December in 2017, there’s going to be a lot of smart money looking to take a position in crypto, and we feel that our experience having been in this since 2013 is incredibly valuable. People come for the pricing, and stay for the insight. Typically that’s the most beneficial thing that we can do for the industry as a whole: help educate new traders, institutions, funds, etc. That said, OTC trading is something we’ve done for some time, as it’s a great source of liquidity for our core infrastructure.
What effect do you see OTC trading having on the future of cryptocurrency? What are its implications for cryptocurrency markets as a whole?
MD: OTC provides off order-book trading, meaning positions aren’t exposed to the traders. In a new market that’s ultra illiquid relative to the money sitting on the sidelines, this is critical. On the same note, immature markets require a lot of education, and they need it yesterday. Wyre focuses on this and works closely with a lot of different players coming into the space, whether partners or not. The best thing we can do is share our insight & experience to help fast track the on-ramps into this new asset class.
Wyre is one of the few licensed money transmitters in the cryptocurrency space. Why is this significant? What insights can you share about the future of regulation and compliance in crypto?
MD: When we first started out around 2013, we were discussing the MSB registration requirements with other investors. A lot had push back and sought exemptions or reasons why registration does not apply to them. For us, we felt it was a safer bet to go ahead and register back then, trying to do more with the ability to roll back if the registrations weren’t required instead of doing less and having to play catch up. 2014 saw MSB clarity from FinCEN. 2018 will likely see broker/dealer clarity from the SEC, and 2019/2020 will likely see clarity from the CFTC (if not sooner). Taking an accommodating approach to the compliance aspect of the industry helps drive confidence to prospective partners who are still tentative on the opportunities within the digital asset ecosystem.
About Michael Dunworth
Michael has been involved in the digital asset space since 2012. He's currently the co-founder & CEO of Wyre Payments. Currently, the largest cross-border payments platform built on top of the blockchain. Having processed over $1B in payments in their first 18 months, Wyre derives their FX through trading algorithms and crypto liquidity pools in multiple geographies. Delivering efficiencies in the speed of settlement, price, and transparency. Wyre feeds their liquidity by providing one of the leading OTC trade desks for the private equity market, asset managers, exchanges, and hedge funds. Michael additionally serves as a soundboard for a number of companies & platforms, that are aiming to adapt themselves to this innovative industry.