OTC crypto trading: how the desks work
Large crypto trades often never touch a public order book. This guide explains how over-the-counter desks quote, execute and settle them, and where the risks sit.
In 30 seconds
OTC crypto trading is the direct, bilateral trading of digital assets between a client and a desk, away from a public exchange order book. The client asks for a price, the desk quotes one for the full size, and the trade settles once both sides deliver. It suits large orders that would move a public market, but it adds counterparty and settlement risk.
What an OTC desk is
"Over the counter" means a trade agreed directly between two parties instead of on an exchange's central book. A crypto OTC desk is the business unit, or the whole firm, that handles those trades. Its clients are usually funds, companies and other large holders who need to move more size than a public book can absorb.
Desks work in one of two ways.
- Principal: the desk trades from its own inventory and becomes the client's counterparty. It carries the position's risk until it hedges or sells.
- Agency: the desk acts as a broker. It finds the other side and charges a commission or spread, without holding the position.
Many desks do both. A principal desk works much like the crypto market makers that quote on exchanges, but privately.
The request-for-quote workflow
Most OTC trades start with a request for quote (RFQ). The client tells the desk the asset, the side and the size: for example, to buy 250 BTC against US dollars. Some clients reveal the side and some ask for a two-way price, a bid and an offer, so the desk cannot tell which way they lean.
The desk then prices the request. It checks public prices and depth, its own inventory, and how long a hedge would take. It sends back a firm price for the whole amount, valid for a short window that is often measured in seconds.
The client accepts or lets the quote lapse. If it accepts within the window, the trade is done at that price, regardless of what the public market does next. That certainty is the core of the service. A buyer on a lit book does not know the final average price until the order is filled. An RFQ buyer knows it before committing.
From request for quote to settlement
- OnboardingThe client passes identity and source-of-funds checks once.
- RequestThe client asks for a price on asset, side, size.
- QuoteThe desk sends a firm price valid for seconds.
- AcceptanceThe client accepts in time and the price locks.
- SettlementCash and crypto move under the agreed settlement terms.
Block trades and why size changes the venue
A block trade is a single large transaction, too big to send through a public book without moving the price. On an exchange, a 250 BTC market order would consume level after level of offers, and the average price would drift far from the first quote. That drift is slippage.
An OTC desk absorbs that problem. It prices the block as a whole, then hedges over time across venues. The client pays for this through the spread in the quote rather than through visible slippage. Whether that is cheaper depends on the asset, the size and the state of crypto liquidity at the time.
Exchanges built their own answers: Gemini introduced electronic block trading in April 2018, matching large orders away from its continuous order book. Dark pools take a third route, described in the crypto dark pools guide.
How OTC prices are set
An OTC quote is usually built as a spread over a reference price. The reference might be one exchange's midpoint or an average across venues. The spread on top pays the desk for its risk and costs: the chance that the market moves before it can hedge, the depth it will need to use, and the capital it ties up.
An illustrative example: the reference midpoint for BTC is 60,000, and a desk quotes a client's 250 BTC buy at 60,090, a spread of 15 basis points (0.15%). The total price is 15,022,500. If the client had sent the order to a thin book and walked it to an average of 60,150, the OTC quote would have been cheaper. If the book had been deep enough to fill near 60,030, it would not.
Quotes expire quickly because the reference moves. A desk that left a firm price open for minutes would be giving the client a free option to accept only when the market had moved in the client's favor.
Settlement, pre-funding and counterparty risk
Agreeing a price is half of an OTC trade. The other half is moving the assets. On an exchange, both sides have deposited funds in advance and the venue swaps balances internally. In OTC trading, the two sides have to deliver to each other, and someone has to go first.
Desks handle this in a few common ways. Many require pre-funding: the client deposits cash or crypto before the trade, so the desk carries no delivery risk. Established clients may get post-trade settlement, where both sides deliver after the trade within an agreed time, which means one side briefly carries the risk that the other fails to deliver. Some arrangements use a third-party custodian that holds both legs and releases them together.
This is counterparty risk, and it is the main difference between OTC and exchange trading. A client that pre-funds a desk is exposed to the desk's solvency until delivery. The November 2022 Chapter 11 filing of FTX Trading Ltd. showed how a failure at a large crypto firm can trap client assets for a long time.
Onboarding: KYC and AML checks
Before any quote, a desk has to know who its client is. Onboarding usually covers KYC (know your customer) checks on identity and ownership, questions about the source of funds, and screening against sanctions lists. These steps come from anti-money-laundering (AML) rules, and the details depend on where the desk is licensed and where the client is based.
Licensing frames the whole activity. In New York, the BitLicense under 23 NYCRR Part 200, effective June 24, 2015, requires a license for virtual-currency business activity involving the state or its residents. In the European Union, MiCA requires crypto-asset service providers to be authorized by a national authority; it applied in full from December 30, 2024, and the transitional period for existing firms ended on July 1, 2026 at the latest. The crypto regulation guide covers these regimes as of October 2026.
| Feature | OTC desk | Exchange order book | Dark pool |
|---|---|---|---|
| How price is found | Desk quote over a reference | Visible bids and offers | Borrowed reference, often the midpoint |
| Who the counterparty is | The desk, or a client it finds | Anonymous, through the venue | Anonymous, through the venue |
| Price certainty for full size | Known before acceptance | Known only after the fill | Midpoint known, fill not guaranteed |
| Settlement | Bilateral, pre-funded or agreed terms | Internal, against deposited balances | Usually internal to the venue |
| Typical size | Block size | Any size | Often above a minimum |
When traders use OTC instead of an exchange
The common thread is size relative to the market. A treasury converting a large holding, a miner selling a month's output, or a fund entering a position in a thin token can all expect heavy price impact on a public book. A single quoted price removes that uncertainty, at the cost of the desk's spread.
Discretion is the second reason. A large public order tells the market that a big buyer or seller is active. An RFQ reveals the interest to one desk, or a handful, and the trade prints nowhere public in real time. Large issuers also use OTC channels: Ripple's quarterly XRP Markets Reports, for example, have described sales of XRP through OTC and programmatic channels.
Small orders in liquid pairs usually cost less on an exchange, where spreads are tight. A trader who wants to work an order slowly and capture the spread may prefer limit orders or a smart order router.
Short answers
OTC crypto trading FAQ
What is a crypto OTC desk?
A crypto OTC desk is a firm or business unit that trades digital assets directly with clients instead of through a public exchange order book. It quotes a firm price for the full size requested and then settles the trade bilaterally. Desks act as principal or as agent.
How does a request for quote work in OTC crypto trading?
In OTC crypto trading, a request for quote starts when the client tells a desk the asset, size and sometimes the side. The desk replies with a firm price valid for a short window, often seconds. Accepting in time locks the trade at that price.
Is OTC crypto trading cheaper than using an exchange?
OTC crypto trading is not always cheaper. For large orders in thin markets, a desk's quoted spread can cost less than the slippage of walking a public order book. For small orders in liquid pairs, exchange spreads and fees are usually lower.
What is counterparty risk in OTC trading?
Counterparty risk in OTC trading is the chance that the other side fails to deliver cash or crypto after a trade is agreed. A client that pre-funds a desk is exposed to the desk's solvency until settlement. Third-party custodians can reduce that exposure but do not remove it.
Why do OTC desks require KYC?
OTC desks require KYC because anti-money-laundering rules oblige them to verify who their clients are, check the source of funds and screen against sanctions lists. The exact requirements depend on where the desk is licensed, for example New York or the EU.
What is the difference between an OTC desk and a dark pool?
An OTC desk quotes its own price to one client and usually takes the other side of the trade. A dark pool is a venue that matches hidden orders from many participants, often at a reference midpoint, and does not guarantee a fill. Both keep large trades off the public order book before execution.
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