Crypto Platform Launches ‘Dark Pool’ Citing Growing Institutional Interest

Enclave Markets to allow crypto traders to make block trades off-chain to minimize market impact


Source: DALL·E


key takeaways

  • 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.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


    Upcoming Events

    Salt Lake City, UT

    MON - TUES, OCT. 7 - 8, 2023

    Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

    Salt Lake City, UT

    WED - FRI, OCTOBER 9 - 11, 2024

    Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

    recent research

    Unlocked by Template.png


    With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.


    Plus, the rise of RWAs could bring about a significant shift in how real-world investments are managed and accessed


    The distributed cell plan provider started selling its own hotspots in October 2023


    The Brazil-based asset manager’s filing comes during a year of milestone bitcoin and ether fund approvals


    The purchase of five sites in Georgia set to help CleanSpark hit its mid-year operating hash rate target of 20 EH/s


    Plus, it’s beginning to look like we may be in for a cruel summer



    Engaging with XDC provides access to cutting-edge financial tools and places investors at the forefront of the trade finance revolution