Bitcoin Over-the-Counter (or, more generally, crypto OTC) is not what the international crypto exchanges tell you it is. It stands for buying and selling Bitcoin (or other cryptocurrencies) peer-to-peer in a private environment. And you may have been told something else, because the explicit purpose of such a transaction is to avoid the use of crypto exchanges, including so-called "OTC desks" and their excessive regulatory hurdles and requirements. This option is very attractive (only) if the circumstances are right.
Buying and selling cryptoassets over-the-counter, without the protection of regulated institutions, poses unique risks, challenges and pitfalls. In a malfunctioning transaction, the Bitcoin seller can lose his coins without getting paid. The buyer could pay without receiving digital title to the cryptocurrency. In addition, the payment could be challenged, reversed, and charged back later, while the blockchain transfer remains immutable. In the worst-case scenario, an ill-advised Bitcoin investor could find himself unwittingly involved in criminal behavior.
As a result, it is imperative to thoroughly understand the transactional design, structuring options, and risk mitigation opportunities when participating in a private-to-private Bitcoin trade. Only proper oversight will keep P2P BTC OTC safe and protected from both loss and illegality.
The latest industry insights and experiences were recently presented by the firm's president, Dr. Ulrich Eder, in a keynote speech at an international conference in Dubai.
Buying and selling over-the-counter can be conducted without the business need to know your counterparty. To burden the transaction with onerous regulatory requirements is detrimental for several reasons. The prudent businessman, as well as the well advised private individual, should therefore implement tools and modules to minimize or avoid these business disadvantages.
The over-the-counter, private-to-private Bitcoin trade only makes sense in a niche market. It requires that the participants have special needs that can't be met by any of the various highly professional crypto exchanges. Otherwise, it is either a mission impossible from the start. Or it is set up as a scam.
Transaction structures that have been used until 2020 are no longer advisable because they do not reflect the changes in the regulatory framework as well as the business environment for BTC OTC operations. Continuing with old structures is like fist fighting with fire, repeating old mistakes in an increasingly sophisticated and mature environment.
A private-to-private Bitcoin OTC transaction is intended to buy and sell Bitcoin without using regulated crypto exchanges or OTC desks. Often, the use of a letter of credit is considered.
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