How to Start a Crypto OTC Desk

The short version

An OTC desk quotes prices and executes digital asset trades directly with clients, away from a public order book. Starting one means answering seven questions in order: which entity and licence, which liquidity, which custody, how you price, how clients ask for a price, how trades settle, and how you report. The technology runs through all seven.

Liquid Mercury, the Chicago-based institutional digital asset infrastructure provider, builds Mercury OTC, white-label software for running an electronic OTC desk. It does not provide the legal entity, the licence, the liquidity relationships or the custody. This page is a planning guide, not legal advice.

Step 1: Entity and licensing

Decide where the desk will be incorporated, who it will serve, and which licences or registrations apply. This step sets the timeline for everything else, so start it first.

Rules differ by country, by client type and by what the desk does. Acting as principal, arranging trades between others and holding client assets can each be treated differently. Check, with a qualified lawyer, the regime in each place you will operate. Regulators publish starting points.

• United Kingdom. The FCA sets out its approach to cryptoassets, including the anti-money laundering regime.
• European Union. The markets in crypto-assets regulation (MiCA) is summarised by ESMA. See also our MiCA explainer.
• Dubai. The Virtual Assets Regulatory Authority publishes its rulebooks at vara.ae.
• Singapore. The Monetary Authority of Singapore lists its payments rules under regulation and payments.
• Switzerland. FINMA's supervision pages are the starting point.

This list is a prompt to check, not a statement of what you need. Also plan for KYC and AML procedures, a compliance officer where required, and record-keeping.

Step 2: Liquidity providers

A desk needs prices to quote. Most connect to several liquidity providers, such as market makers and other OTC desks, and add their own spread. Decide which assets and sizes you will quote, which providers cover them, and how you will compare their prices.

Questions to ask each provider: what size and asset coverage do they offer, how long are quotes valid, how do they settle, and what are their credit and onboarding requirements? A multi-dealer setup lets competing providers quote against each other. A single-dealer setup relies on one source. Mercury OTC supports single-dealer, multi-dealer and hybrid pricing models. See market makers and liquidity for how providers work.

Step 3: Custody

Decide where client and desk assets are held and who controls the keys. Options include a regulated third-party custodian, an exchange account, or self-custody with institutional-grade key management. The right answer depends on your licence, your clients' requirements and your settlement model.

Custody choice affects settlement speed, counterparty risk and what your regulator expects. Read crypto custody solutions before you decide. Mercury OTC materials describe integrations with custody providers; named partners are confirmed with the Liquid Mercury team.

Step 4: Pricing engine

The pricing engine turns provider prices into the price a client sees. It applies your spread, adjusts for size and risk, and sets how long a quote stays valid. It should also respect your limits: how much inventory the desk can hold, and how much exposure it can take per client.

Decide how the desk handles each trade after it is booked. A dealing book can internalize the trade, hedge it in the market, or pass it straight through to another counterparty (back-to-back). The choice sets your market risk.

Step 5: RFQ and client quoting

Clients need a way to ask for prices. The common patterns are request for quote (a firm price on demand), request for stream (a live stream you can act on) and streaming quotes published to clients. Electronic quoting replaces voice and chat, which are slow, hard to scale and leave fragmented audit trails.

Mercury OTC supports RFQ, RFS and streaming quotes, and a desk can present it under its own brand. For the full flow from quote to settlement, see the OTC trading guide.

For how a corporate treasury client approaches an OTC trade, see corporate bitcoin treasury liquidity.

Step 6: Settlement

Settlement is where trades succeed or fail. Define how the asset and the payment move: pre-funded accounts, delivery versus payment, bilateral settlement or settlement through custody. Define who bears the risk if one leg fails, and how quickly each currency and asset can move.

Fiat is often the slowest leg, so plan the banking relationships and fiat currencies before launch. See counterparty risk in digital asset OTC trading for the options in detail.

Step 7: Reporting

Regulators, auditors, clients and your own risk team all need records. At minimum, keep the full chain of each trade: the request, the quotes, the acceptance, the execution and the settlement. Add position, profit and loss, and exposure reports. A platform that puts compliance, risk and performance reporting in one place saves reconciling three systems.

A realistic order of work

Run the steps in parallel where you can, and in sequence where one blocks the next.

• Start with the entity and licensing check, since it sets the launch date and shapes every contract that follows.
• Open liquidity and custody conversations at the same time. Providers and custodians run their own onboarding and credit reviews, and those take time you do not control.
• Choose the technology once you know your asset list, client types and settlement model. Picking software first tends to force compromises later.
• Test with internal flow before clients. Run mock quotes, mock settlement and a full reporting cycle, and check that every record lines up end to end.
• Set limits before the first trade. Per-client credit, inventory and exposure limits are far easier to set at launch than to impose after a loss.

A common mistake is to treat the desk as a technology project. The harder parts are the licence, the liquidity relationships and the discipline of risk limits, and software supports all three without replacing any of them.

White label vs build

Once the steps are clear, decide how to deliver them. A white-label platform is software built by a vendor and run under your own brand, with no visible vendor name or logo for your clients. You still hold the licence, the liquidity, the custody and the client relationships.

Neither route removes steps 1 to 3. Read the build vs buy guide for the cost and risk comparison, and the desk software checklist for what to ask any vendor.

K33, a crypto broker regulated by the Norwegian Financial Supervisory Authority, used Mercury OTC to automate its RFQ desk across 200 trading pairs and 8 fiat currencies, and its OTC trading volume grew 5x. See the K33 case study.