Bitcoin over the counter

Privately arranged one-on-one cryptocurrency trade transactions


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OTC/BTC refers to the private sale of Bitcoin without the involvement of a crypto exchange. Digital assets can be privately traded to maintain privacy, to avoid an impact on the coin market price, or to minimize transaction costs. In an #OTC trade, two parties trade directly 1-on-1 with each other, unlike on an exchange where orders are matched between buyers and sellers. 

Crypto exchanges and big platforms like Circle, Kraken, Genesis, Bitfinex, HitBTC, or Changelly are offering over-the-counter trades with private and personalized services. Targeted customers are institutions and high net-worth individuals with the need to fill large orders that might be too disruptive if placed on open markets at the exchanges. These stakeholders have to be distinguished from private-to-private sales which base on individually negotiated sales and purchase arrangements.  

LocalBitcoins is a bitcoin startup company based in Helsinki, Finland. Its service facilitates over-the-counter trading of local currency for Bitcoin. Users post advertisements on the website, where they state exchange rates and payment methods for buying or selling bitcoins. A similar service can be found on the Mycelium wallet app.

Off-market p2p transactions offer highly confidential and large quantities of crypto sales and purchases at below-market rates and crypto.  Obviously, they need a careful risk assessment and risk mitigation measures. Different contractual arrangements have separate risk profiles. Price risk and counterparty risk can be minimized with a sophisticated structure. Illegality risks can result in a claim to unwind and reverse the bank transfer while the coin transfer is immutable. The funds can be blocked on the escrow account until a deep KYC investigation is accomplished. Other legal concerns or tax issues might require restructuring in the middle of the transaction.

Good, clean, clear and of non-criminal origin: Players and compliance requirements

Typical participants of a private OTC cryptocurrency transaction that takes place off the exchange are agents and consultants. In addition, a crypto escrow company might be involved in the transfer of the coins, and a fiat escrow company might be involved for the payment in US$ or other fiat currencies.

Procedure: An OTC/BTC can include face2face meetings by buyer, seller, or their agents. Payments can be accomplished in cash, by bank transfer or other means. Gold and other precautions metals can be used as payment for coins and tokens. In a multi-jurisdiction OTC sale, compliance with several regulatory frameworks is a challenging task that requires sophisticated advice regarding KYC, AML, crypto regulations, understanding of blockchain technology and the contractual legal framework.

Professional services and transaction support

PUGNATORIUS Ltd. advises on the drafting and negotiation of international Bitcoin sales and purchase agreements, escrow arrangements and supporting documents. The law firm designs the structure, initiates the workflow and monitors the whole procedure until completion. The blockchain-experienced counselor advises on market typical conditions, commercial arrangements and the overall risk structure of an OTC/BTC. It advises on counterparty risks, compliance requirements, tax reporting obligations and accomplishes full due diligence on behalf of the client.

Services: An involvement in OTC transactions is possible, as the case may be, as a consultant, agent or representative of the client. Services can be provided from Thailand or from abroad by affiliated parties. Legal notice: The Bangkok law firm acts neither as a financial advisor, buyer or seller in a crypto transaction, nor acts as trader, exchange, or agent. The services provided in Thailand are strictly limited to legal and tax advice. 

Regarding crypto and fintech, the law firm offers mainly these seven legal and tax services:

  • Thai crypto-compliant company formations
  • Regulatory-avoiding and tax-efficient cross-border structuring
  • Digital asset and financial services licensing
  • Blockchain and ICO advisory services
  • Thai and cross-border tax structuring
  • Crypto transaction and OTC support services
  • Legal opinions and professional statements

Details can be found at “Legal advice, tax structuring, transaction support services and business matchmaking on Fintech, cryptocurrency and digital asset ventures“.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship. This post bases on specific hands-on know-how and experience. No explanation or education is provided outside of a paid consultancy agreement. Secure your OTC/BTC in paradise.

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