In a meeting in Singapore in December 2018 leading by Hoe Lon Leng – former managing director at banking giant Goldman Sachs, the idea for a Clearinghouse for cryptocurrency derivatives called Liquidity Offset Network was carried out and it could be launched by this July by the Singapore Monetary Authority. This Clearinghouse is looking to increase the cryptocurrency trading volumes and reduce trading costs. In this meeting, Simon Nursey – Leng’s former colleague, said “We see this as getting the crypto market into shape in order to absorb the entry of traditional finance firms… We are witnessing the emergence of a new asset class.”
In the traditional finance industry, clearing indicates the process of a trade subsequent to matching of the order. Once the buyer and seller comply with the term of sale, the clearinghouse serves to “clear” that particular asset before it’s settled, as well as guaranteeing that the deal will be fulfilled. The clearinghouse for Crypto would need to hold less collateral. It will eliminate the need for traders to post collateral with each of their counter-parties.
In May, CORA (Crypto OTC Roundtable Asia) will hold the second meeting in Chicago to draw more interest from US-based traders. Rich Rosenblum, co-founder of GSR, an algorithmic trading firm focused on digital assets, believes that this meeting could be crucial. “Due to weak regulatory oversight in Asia, it will be challenging for initiatives of this kind to have an industrywide impact,” said Rosenblum. “Similar efforts in the U.S. have the opportunity to work with more progressive regulators, which may be the deciding factor in what sets the global standards and legal framework of the future.”