BitGo and Copper Team Up for Off-Exchange Deribit Settlement

Crypto custody firms BitGo and Copper have joined forces to provide off-exchange settlement for traders using options exchange Deribit. The collaboration, announced on Thursday, enables clients of both firms to trade spot and derivatives on Deribit while their assets remain securely stored in qualified custody with BitGo Trust. The settlement process leverages Copper's ClearLoop system and the Go Network, ensuring seamless and automatic settlement.

In the wake of the FTX collapse, traders are increasingly seeking ways to reduce risks associated with leaving assets on exchanges. BitGo and Copper's partnership, established two years ago, aims to facilitate trading on exchanges while keeping assets within a regulated custody environment. The combined BitGo and Copper ClearLoop networks enable delivery versus payment (DvP) settlement, allowing any BitGo client to instantaneously settle with any other BitGo client in an atomic swap of assets without the need to bring them on-chain.

According to Brett Reeves, head of BitGo's Go Network, the DvP settlement process can be executed from cold storage without incurring fees. This approach helps eliminate settlement risk, or Herstatt risk, and brings it closer to the traditional finance space. Under the hood, assets are held with qualified or regulated custody at BitGo. At pre-defined intraday settlement periods, the assets owed to Deribit are removed from a BitGo account and transferred to the Copper ecosystem, ultimately reaching Deribit. If these assets are owed to the client, the process is reversed.

Luuk Strijers, CEO of Deribit, expressed his enthusiasm about the collaboration, stating that the synergies between the companies will unlock new opportunities for investors and transform the trading landscape.