Checking an OTC Counterparty Before the First Trade

An hour of checks before a first over the counter trade removes almost all of the risk that matters. Here is the hour.

The entity

Get the full legal name, registration number and jurisdiction in writing.

Look it up in that jurisdiction’s company register. Confirm it exists, is active, and that the directors match the people you are dealing with. What follows is easier to spot once you know what a regulated crypto liquidity provider actually does in the same situation.

A company registered last month, operating a trading desk, is not disqualifying and it is information.

The licence

Which authority, which number, which permitted activities.

Verify on the authority’s own register. Confirm the entity matches the one on the contract, not a related company.

If the claimed jurisdiction has no meaningful supervision, treat the licence as decoration.

The bank account

Settlement should be to or from an account in the same registered company name, at an identifiable bank.

An account in an individual’s name, or a company unrelated to the counterparty, or in a jurisdiction with no connection to the business, ends the conversation. Funds and family offices face the same pattern with more at stake, which is where a regulated European crypto platform fits.

This is the single most informative check and it is often skipped because asking feels impolite.

The people

Verify independently rather than through profiles they supply. A professional history that cannot be confirmed anywhere else is fabricated.

The settlement structure

Agree it before agreeing a price, and hold it constant regardless of size.

For a first trade, settlement through a regulated intermediary holding both legs. Accept the fee.

A counterparty who accepts that structure for a small trade and objects for a large one has explained the arrangement.

The references

Ask for two counterparties they have settled with, and contact them independently rather than through a supplied introduction.

Genuine desks provide these. The follow-up question worth asking a reference is not whether trades settled but whether anything ever went wrong and how it was handled.

The answers that end it

A refusal to name the contracting entity. A licence that does not resolve on the register. A settlement account in a different name. A change to the settlement structure for a larger trade. Pressure to move before verification completes.

Any one of these is sufficient. None requires a judgement call.

What the hour buys

It converts the trade from a decision about a person into a decision about a verified entity with a documented structure. For the version of all this that is actually supervised, a regulated crypto exchange publishes what it is bound by.

That is the whole objective, and an hour against the amounts involved is the cheapest control available.