Digital Gamma has launched the TPR (Tri-Party Repo) protocol to provide greater transparency with less capital requirement and less risk to borrow/lend transactions involving two counterparties.
In TPR, Digital Gamma acts as an administrator between two counterparties. Both the counterparties will have to deposit some amount as retained collateral with Digital Gamma. The terms of each transaction, like the term of the loan, the interest rate, the default procedure and the amount of retained collateral, will be decided by the two counterparties.
Digital Gamma employs a rebalance protocol in which if one of the counterparties does not follow the terms of the agreement, a part of the retained collateral amount is moved to the other counterparty.
As both parties deposit collateral, the amount paid by each party is less compared to the traditional practice of only one counterparty putting up the collateral.
Co-founder of Digital Gamma, Ari Pine, said,
Digital Gamma is committed to bridging the gap between traditional finance and crypto. Efficient borrow/lend can increase everyone’s customer base.
One of TPR’s earliest users and founding principal of BK Coin Capital Kevin Kang said,
Creating an efficient crypto-repo market will provide greater liquidity and give institutional investors a sense of comfort knowing that cryptocurrency has the same market structures as other traditional asset classes.
Digital Gamma employs Gemini Clearing and Gemini Custody for clearing and settlement services of pre-arranged trades. Managing Director of Operations Gemini Jeanine Hightower-Sellitto said,
We value working with innovative companies like Digital Gamma that are building bridges to move the crypto industry forward.
Digital Gamma may extend TPR protocol beyond spot trading to options. The adoption of risk trading tools common to traditional finance to cryptocurrency would encourage more financial institutions to adapt to cryptocurrency.
Digital Gamma was founded by capital market specialists Ari Pine and Paul Sacks.