Cryptocurrency transactions can involve multiple parties and be extremely complicated. It also involves an interaction between two parties in the process who have varying interests. While the buyer and seller may have conflicting interests, they must come to a common ground for a transaction to go through. This is where our role as a broker intermediary comes through.
What does a Broker intermediary do?
A broker intermediary represents the interests of both the buyer and the seller and tries to ensure that the transaction for the transfer of the cryptocurrency assets goes through. It is crucial to use the services of a broker intermediary for large cryptocurrency transactions since they cannot be dealt with through a normal cryptocurrency exchange. Any attempt to sell a large batch of cryptocurrencies on an exchange is likely to result in a price drop that will hurt the seller.
How does a Broker Intermediary Work?
A Broker Intermediary like Empire Global works based on its in-depth knowledge of the cryptocurrency market including the key players and prominent cryptocurrency players.
As a first step when a Broker Intermediary is contacted by a potential seller to sell a large batch of cryptocurrencies, Empire Global seeks the details of the assets held and the price sought for them. It then starts seeking a seller who is interested in the purchase of a particular cryptocurrency. The process works in the reverse if a buyer approaches seeking the purchase of a particular cryptocurrency. The Broker Intermediary then wishes to know about the cryptocurrency sought and the price that the buyer will pay.
Once a potential counterparty (a buyer for a sale request or a seller for a buy request), three more players come into play. They are the Lawyers, KYC and Escrow Service providers who clear the paperwork for the trade. Empire Global as a broker intermediary also has a team of legal professionals which minimizes the need for further involvement of an external lawyer. With the team in place, the transaction can start.
The traditional intermediaries or brokers expect that a potential buyer on the receipt of a buys or sell intimation, the broker is expected to make an initial communication with the buyer or seller and learn more about the exact quantum of the transaction. In case the intermediary is not fully sure about the credentials of the person who communicated the interest, the proof of funds or coins may be sought. This has become more common in the last two years as brokers have realized that many transactions fall through at the last moment due to a lack of funds or assets. Once the assets have been verified, the broker or service provides the initial legal documents to the interested party. These documents normally contain an NDA stating the basic outline of the deal and also information about the KYC process which has to be completed. The brokers also normally provide information about the commission that they expect in the transaction and the other costs for the transaction and expect the buyer or seller to agree to those terms in writing.
On the side of the counterparty, the intermediary starts preliminary discussions on the transaction and may seek evidence of funds if it is a buyer or proof of coins if it is a seller. Once the preliminary discussions come to a successful conclusion, the broker and the counterparty enter into initial agreements like an NDA and a commission agreement to continue with the discussions.
After the buyer and the seller for the transaction have been found by the broker, the other players in the transaction, the service providers come into play. The service providers here include the lawyers, the Know Your Client document verification service providers and the escrow service providers.
The lawyers for the seller normally take the lead here and they prepare the documents here for the transaction starting with the Letter of Intent which sets the broad outline for the terms of the final Agreement. The lawyers for the buyer verify the letter of intent and the broker also agrees to the terms. This letter of intent will serve as the reference document for the completion of the transaction.
Once the letter of intent has been executed by all the parties, the broker intermediary seeks final confirmation about the existence of funds from the buyer and about the existence of cryptocurrency from the Seller. At this stage, as proof of the existence of the assets, proof of coins on the blockchain is sought and screenshots are normally not accepted.
After the verification of assets, the KYC service provider comes into play. The identities of the Buyer and Seller are sometimes known only to the Broker and the KYC process is crucial to ensure that the transaction is in line with the law. Since the buyers and sellers in many cases do not want to disclose their identities, the NDA is signed at the first stage to protect the identities. The KYC process is however mandatory in most countries for high-value transactions. After the completion of the KYC process, the lawyers move the transaction forward and the final agreements for the deal are executed. These agreements, however, move through a final stage of review before they are signed.
The last lap is simple, the buyer is instructed to transfer the funds to the escrow service provider. On receipt of confirmation, the bitcoins are transferred to the buyer. With very large transactions, the transfer of coins is undertaken by experts and divided into tranches to minimize the impact on the markets and to reduce price fluctuations from one sudden large transaction. Once transferring of bitcoins is completed the funds are transferred to the seller after deduction of the commission by the brokers and the other service providers.
What are the requirements to obtain the services of a Broker Intermediary?
There is no minimum benchmark for using the services of a Broker intermediary. But, keeping the need to provide bespoke services in mind, it is essential to know that normally transactions start at around 100 BTC or equivalent in fiat currency.
Cost for broker intermediary services
The costs for providing services as a broker intermediary varies depending on the size of the transaction and also the cryptocurrency involved.