Digital Gamma, a provider of crypto market infrastructure, today has announced its newest offering, TPR (Tri-Party Repo). Utilizing the TPR protocol, two counterparties can engage in a borrow/lend transaction with greater transparency and reduced capital requirements, lowering risk and cost as compared to current market solutions.
Currently, when borrowing crypto, it is common to post 150% collateral with a market maker while the market maker posts nothing. With TPR, Digital Gamma acts as an administrator between two counterparties. It’s a transparent bilateral transaction that requires both parties to post margin. Default risk is mitigated with frequent rebalancing – keeping the notional value of the repo in balance.
“Creating an efficient crypto-repo market will provide greater liquidity and also give institutional investors a sense of comfort knowing that cryptocurrency has the same market structures as other traditional asset classes.”
– Kevin Kang, founding principal of BK Coin Capital
Digital Gamma designed TPR to be a straightforward rules-based protocol with no surprises. Increased transparency will grow the overall market and will change how participants borrow and lend crypto. A few early TPR transactions have cleared between Gemini customers.
“Gemini is excited to have Digital Gamma utilizing Gemini Clearing and Gemini Custody to efficiently and securely conduct their transactions. We value working with innovative companies like Digital Gamma that are building bridges to move the cryptocurrency industry forward.”
– Jeanine Hightower-Sellitto, Managing Director of Operations, Gemini
Applications for Digital Gamma’s TPR extend beyond spot transactions. For example, the protocol works well for options. A risk management protocol familiar to capital markets professionals may play a critical role in finally ushering in broader institutional adoption of crypto.
“Repo sits at the center of modern financial markets. Digital Gamma is committed to bridging the gap between traditional finance and crypto. Efficient borrow/lend can increase everyone’s customer base.”
– Ari Pine, co-founder of Digital Gamma