On September 14, 2018, fintech startups Wyre and Republic Protocol announced their partnership to promote the uptake of institutional investors to Republic’s decentralized dark pool among other advantages. The increased liquidity and KYC/AML compliance offered by Wyre will help build “a powerful nexus between digital assets and the traditional financial infrastructure,” according to the CEO of Republic Protocol Taiyang Zhang.
Dark Pools and Market Stability
As large bag holders of cryptocurrencies emerge from the first era of investing, they have also demanded services traditionally reserved to the world of finance. Dark pools, or closed markets in which trades can occur without critical observation, is typically how these operations are performed. By guarding the visibility of large-scale buy and sell orders, such services also help keep markets stable. Filling this need was Republic Protocol back in February 2018 after which the firm collected over 35,000 ether from prospective investors.
Since then, the firm has gained traction in bringing a service born out of the financial world of the 1980s. The most recent partnership with Wyre now combines the interest in decentralized dark pool trading with compliance and liquidity. The San Francisco-based money transfer startup boasts same-day settlements and compliance standards rarely found in the blockchain industry.
As keen as institutional players are in joining the crypto bandwagon, it’s been a tricky market to enter from a regulatory standpoint. Head of Research at Wyre, Louis Aboud-Hogben explained that:
“Traditional institutions, be they investment funds or trading desks, are currently eager but unable to participate in decentralized markets, as they must know who their counterparties are for compliance purposes, and they need sufficient liquidity to trade.”
More importantly, Wyre has a suite of tools at its disposal to meld the world of crypto with legacy infrastructure seamlessly. When asked about the advantages of the partnership, Taiyang Zhang of Republic told BTCManager that:
“We have partnered with Wyre for their long track record of delivering value in this space with their OTC desk, previous remittance business, and now KYC/AML system. They have an incredible team and their experience when it comes to predicting the future of the sector.”
The CEO also mentioned that the company would continue to look for other advantageous OTC platforms in the future. Zhang explained that Republic isn’t bound to digital assets either and are still looking into other instruments and contracts.
The Financialization of Crypto
As we enter the ten year anniversary of the financial crisis, it’s hard not to draw comparisons to the changes taking place within the cryptocurrency space. The arrival of second- and third-degree derivatives, fully auditable stablecoins, futures trading, and dark pools all point to something much different than what Satoshi Nakamoto may have envisioned.
No matter where you stand on the subject, however, we may not have much choice according to Zhang:
“My opinion is that the financialization of crypto is happening regardless of whether we embrace it or shun it. Traditional finance and the rapid increase in technological innovation happening in crypto are converging in the form of higher transparency in finance and efficient settlement of assets.”
Republic Protocol’s mainnet will go live in September as well as the launch of RenEx, their decentralized dark pool.