Square, a financial service provider, revealed that it is now trading through “private broker-dealers” in lieu of “public cryptocurrency exchanges”. The move is said to take effect on Square’s Cash app, which aids Bitcoin [BTC] transactions.
The change, which was divulged to the public this week in Square’s quarterly report, is a stride towards contributing to a more competent Bitcoin trading service, experts say. Cryptocurrency enthusiasts argue that by shifting from trading on public exchange platforms to OTC [Over The Counter] channels, Square will be able to construct a platform that is safe and quick. This would effectively create less price volatility when users trade in large amounts of Bitcoin.
Experts believe that the issue with public exchanges is that they are vulnerable to hacks, essentially costing users millions of dollars. There is also the added factor of transactions taking a long time to process, extending from several hours to even days.
Hunter Horsley, the CEO of Bitwise Asset Management said:
“There are many merits to trading OTC, which might be motivating Square’s switch.”
When financial service providers move to OTC platforms where exchange trading is done directly between two bodies without the surveillance of an exchange, several key issues such as may be solved, authorities say.
Square is also new to the commerce of Bitcoin trading. Square is said to have produced $37 million in profits on Bitcoin but sources say they have spent approximately the same amount in offering free trading to users on their Cash app.
Meltem Demirors, The Chief Strategy Officer at Coinshares, a cryptocurrency investment firm said:
“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.”
Sarah Friar, The Chief Financial Officer of Square said:
“The payment company launched Bitcoin trading in its Cash App in January. In order for customers to be able to buy and sell Bitcoin instantly, Square holds a certain amount of cryptocurrency on the customer’s behalf. In the time between Square buying Bitcoin and customers making a trade, the price can change drastically and the company can lose money.”
It is unconfirmed as to which of the OTCs Square will collaborate with but June saw Square partnering with Genesis Trading, a firm that deals with Bitcoin brokerage. Other partnerships, if any, are yet to be announced.
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