Glossary

Cross-Border Trading

Moderate

Cross-border trading in financial markets and trade finance represents the opportunity to trade globally using a local currency.

What Is Cross-Border Trading?

Cross-border trading grants the opportunity to trade in international markets against local counterparties and currencies, which presents unique trading opportunities. Investors engaged in cross-border trading can benefit from access to global liquidity, lower slippage and take advantage of spreads between prices locally and internationally to generate returns.

Cross-border trading in financial markets and trade finance represents the opportunity to trade globally, across international markets, using a local currency and oftentimes against a local counterparty. With respect to global markets, cross-border trading offers several benefits for investors seeking to capture unique trades, like capitalizing on pricing discrepancies and arbitrage opportunities. 

In the early days of crypto trading, traders in different countries couldn’t participate in the markets available in other countries. For instance, if you had an account at a U.S.-based crypto exchange, you could only trade in BTC/USD. However, with the advent of cross-border trading platforms, you can easily participate in other countries’ markets, accessing the local currency’s liquidity, such as BTC/JPY, BTC/EUR and more. 

Cross-border trading allows traders to access major spot trading pairs available across licensed countries. Suppose your exchange follows the international regulatory standards and complies with each country’s local KYC and anti-money laundering laws. In that case, you’ll be able to trade in these international markets using their local currency against foreign counterparties with just one local trading account. You won’t need to go through several different sign-up processes or register on dozens of other exchanges, avoiding unwanted hassles and delays, and most importantly, the risk of getting your onboarding application denied if you don’t reside in the local jurisdiction

How Does Cross-Border Trading Work?

Cross-border trading is a straightforward process where a crypto exchange provider acquires licenses to operate in several countries while following the financial regulations of each country.

Cross-border trading creates a truly global crypto trading platform, allowing registered users across countries to benefit from the single marketplace’s scalability, depth and liquidity. Traders can sign-up for the exchange and access liquidity pools and spot trading pairs of all licensed countries.

With cross-border trading, you can stake your fiat currency in global trading marketplaces and benefit from the minimal spread between the crypto’s buy and sell prices while being subjected to your native country’s privacy policies and financial regulations. 

Why Engage In Cross-Border Trading?

In addition to the ability to access global markets, cross-border trading also offers several other unique benefits, including:

  • Vast liquidity: Liquidity is among the most important aspects of trading. In cryptocurrencies, it is the measure of how easily you can convert your crypto into cash or exchange it with another crypto. With cross-border trading, you have access to a larger market, granting the ability to view and analyze multiple pairs in your native currency while delivering more ways to maximize returns.
  • Price disparities/arbitrage: The price of digital assets vary from one exchange to another, especially when multiple currencies are involved. To capitalize on the differences, you could open several accounts at several exchanges. However, with centralized exchanges offering cross-border trading, you’ll be granted access to several markets from a single dashboard, opening up the possibility of implementing arbitrage strategies from one account. One famous example of this is the Kimchi premium.
  • Different counterparties: There are hundreds of crypto marketplaces across the globe. Asia in particular contributes a sizable amount of retail trading activity, with each jurisdiction exhibiting different trading behaviors. With cross-border trading, investors can explore new strategies for generating returns by leveraging their knowledge of these different patterns and behaviors.

Author:

With over two decades of experience covering several leadership roles across some of the most prominent global organizations, Joel Edgerton is currently a part of the Board of Directors of bitFlyer Holdings, Inc., the COO, and the head of global business planning office of bitFlyer USA, Inc.

Joel has an International Master of Business Administration (MBA) degree from South Carolina University, specializing in finance and Japanese. He also has a keen interest in cryptocurrency and leads the bitFlyer team in expanding its global dominance using blockchain technology.

Connect with Joel on Twitter.