Crypto Platform Launches ‘Dark Pool’ Citing Growing Institutional Interest

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  • Asset man­agers, hedge funds and sys­tem­at­ic trad­ing firms are among those demand­ing this type of prod­uct, Enclave Mar­kets CEO says
  • Hid­den Road Part­ners, Ledger­Prime, Repub­lic Cryp­to, Fir Tree Part­ners, Scrypt, FBG Cap­i­tal and Bliz­zard Fund are among those test­ing the product

Cryp­to mar­ket­place Enclave Mar­kets is prepar­ing to allow its whitelist­ed users to trade blocks of dig­i­tal assets pri­vate­ly, echo­ing dark pool trading.

The platform’s Enclave Cross, still in beta, allows cryp­to traders to make block trades off-chain. Once the traders move their assets off-chain, Enclave’s tech­nol­o­gy match­es traders with inter­est­ed coun­ter­par­ties with­out reveal­ing wal­let addresses. 

All Enclave Cross trades are exe­cut­ed at the mar­ket price. Exe­cut­ing large orders on exist­ing trad­ing plat­forms can lead to mate­r­i­al mar­ket impact, accord­ing to Enclave CEO David Wells

A hybrid centralized, decentralized model

The prod­uct was inspired by dark pools, which have long been offered in tra­di­tion­al markets.

Cryp­to dark pools are noth­ing new, either, with Krak­en launch­ing a suite of dark pools in 2015. SFOX launched a cryp­to dark pool in 2020, and a num­ber of cryp­to prime bro­ker­ages also offer sim­i­lar services.

But Wells said no cur­rent com­peti­tors offer as much anonymity.

“In oth­er cen­tral­ized dark pools, users must trust the exchange oper­a­tor to be a good actor,” he said. “Our mod­el is trust­less and decen­tral­ized using nov­el tech­nol­o­gy to ensure pri­va­cy, secu­ri­ty and fair trad­ing practices.”

Cen­tral­ized mod­els can suf­fer from infor­ma­tion leak­age, under­min­ing their pri­va­cy ben­e­fits, but Enclave hopes to address that with an adju­di­ca­tor approval process sim­i­lar to a smart contract. 

Bar­clays and Cred­it Suisse paid rough­ly $150 mil­lion in fines in 2016 after being charged with dark pool vio­la­tions.

The insti­tu­tions using Enclave Cross must pass know-your-cus­tomer (KYC) require­ments. The cryp­to firm also does sanc­tions screen­ing and anti-mon­ey laun­der­ing (AML) monitoring. 

Institutional push

Wells said asset man­agers, hedge funds and sys­tem­at­ic trad­ing firms are among those demand­ing this type of product. 

“If you look at equi­ties, like 60% plus of vol­ume is trad­ed by insti­tu­tions, not by retail,” he said. “I think that is the direc­tion that cryp­to is mov­ing in general.”

Trad­ing firms and prime bro­kers, includ­ing Hid­den Road Part­ners, Ledger­Prime, Repub­lic Cryp­to, Fir Tree Part­ners, Scrypt, FBG Cap­i­tal and Bliz­zard Fund, have begun test­ing the ser­vice. Enclave Cross cur­rent­ly sup­ports the trad­ing of avalanche (AVAX), ether (ETH), bit­coin (BTC) and USD Coin (USDC).

The com­pa­ny, which was incu­bat­ed by Avalanche devel­op­er Ava Labs, seeks to add more insti­tu­tions and assets in the com­ing months.

Wells got into the cryp­to space in 2017 when he began work­ing for blockchain infra­struc­ture com­pa­ny Pax­os. He then worked as a vice pres­i­dent of strat­e­gy and prod­uct devel­op­ment for two years at Two Sig­ma before becom­ing CEO of Enclave Mar­kets in January. 

Because of his back­ground, Wells said, he is famil­iar with the infra­struc­ture needs for insti­tu­tions, as well as the types of liq­uid­i­ty and trad­ing tools they seek out. 

The exec­u­tive added that Enclave Mar­kets could look to offer a spot exchange in the future, as well as deriv­a­tives and swaps. 

“I think the real growth oppor­tu­ni­ty over the next five years is to build prod­ucts that specif­i­cal­ly suit the needs of those larg­er, tra­di­tion­al asset man­agers that the large banks and the large tra­di­tion­al prime bro­kers won’t be able to serve just because they’re slow-mov­ing and risk averse,” Wells said.


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  • Ben Strack
    Ben Strack is a Den­ver-based reporter cov­er­ing macro and cryp­to-native funds, finan­cial advi­sors, struc­tured prod­ucts, and the inte­gra­tion of dig­i­tal assets and decen­tral­ized finance (DeFi) into tra­di­tion­al finance. Pri­or to join­ing Block­works, he cov­ered the asset man­age­ment indus­try for Fund Intel­li­gence and was a reporter and edi­tor for var­i­ous local news­pa­pers on Long Island. He grad­u­at­ed from the Uni­ver­si­ty of Mary­land with a degree in journalism.

    Con­tact Ben via email at [email pro­tect­ed]

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