Galaxy: On-chain OTC Options Trade Key to Finance Evolution

Galaxy Digital is working with crypto investment firm CoinFund to alleviate credit risk and boost transparency with on-chain trading


rafapress/Shutterstock modified by Blockworks


Trading over-the-counter (OTC) options on-chain represents a key next step in finance after the collapse of various centralized heavyweights in the segment, according to Galaxy Digital executives.

The crypto-focused firm is now able to trade such options tied to digital assets with Galaxy, the company told Blockworks. Galaxy completed its first trade with crypto investment firm CoinFund.

OTC options are derivatives contracts that trade outside of a formal exchange. The buyer and seller can create their own terms — including strike price and expiration dates — for the private transaction. 

Trading them on-chain alleviates credit risk typically associated with traditional OTC options trades, while also protecting privacy, according to Jason Urban, Galaxy’s global head of trading.

“You’re essentially using smart contracts to manage the collateral, ensuring that even if a counterparty defaults, the other party on the trade can get the money they’re owed,” Urban told Blockworks.

“Previously, margining had to be done off-chain, so a typical OTC option in crypto looked a lot like an OTC option within another asset class.”

Onchain “trustless” settlement means that each party must submit their side of the settlement before anything is released to either entity, added Lini Gao, Galaxy’s vice president of institutional sales and structuring.

“Counterparties must be compliant to a pre-defined set of rules surrounding margin requirements throughout the life of the trade,” Gao said. 

Investor demand for on-chain solutions that afford more transparency and less credit risk has picked up following the collapse of crypto exchange FTX and other centralized entities in recent months, Urban noted. 

To execute, margin and settle the trade, Galaxy used Aevo, an on-chain options trading platform developed by Ribbon Finance. 

The DeFi derivatives platform introduced Aevo last September. Its mainnet went live last month — initially allowing users to trade ETH options.

Loading Tweet..

Aevo’s OTC exchange launched Monday, allowing users to trade altcoin options on-chain across weekly, biweekly and monthly maturities.

CoinFund decided to use the platform to benefit from “advantageous margin requirements and on-chain payoff enforcement, as well as being able to select a precise strike price,” according to Ribbon Finance.

The OTC options trade comes a little more than a year after Galaxy made an OTC crypto transaction with banking giant Goldman Sachs via a bitcoin non-deliverable option. 

Galaxy, which says it works with roughly 960 counterparties, posted a net income of $134 million during the first quarter.

Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.

Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.

Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Cosmos Hub: ATOM Economic Zone


Replicated Security, the Hub’s Validation-as-a-Service offering that went live in March, is the first step in bringing value accrual to ATOM stakers.



Kenya’s central bank doesn’t seem enamored by the idea of a CBDC but hasn’t slammed the door shut yet


Both Ethereum and Solana have enjoyed vibrant DeFi environments, but this has not yet been the case for Cosmos


As Japan takes important step forward on stablecoins, industry participants say, proposed US laws around such crypto assets remain in flux


Stablecoins offer global financial access and on-chain transactions without limitations, while FedNow falls short in terms of utility, global reach and inclusivity


Connext wants to make using layer-2s and layer-3s a seamless experience


GameStop has been dabbling in Web3 initiatives since at least January 2022