Beyond FCMs: What Crypto Clearing Actually Needs

Don Wilson and Christopher Perkins wrote sharp analyses of recent crypto market stress. They're right about the problems, but the solution set is bigger than described.

The core issue isn't real-time margining - it's market structure. CEX and DEX perp markets have retail and smaller market makers net long, professional MMs net short. Sophisticated participants - hedgers, stat arb, institutional investors - operate in OTC pools.
Without clearing connectivity between venues, you can't offset positions. Concentrated directional risk in exchange pools could be hedged against OTC positions, but there's no infrastructure connecting them.
ADL feels arbitrary, but loss socialization exists in traditional markets too. Read the rules at any major exchange - clearing members can take allocations, it just never happens. It shouldn't happen in crypto either.
At Pascal, we designed risk waterfalls with concentration factors and liquidity adjustments that would have handled recent volatility better. Though when everyone on a platform is positioned the same direction, that's fundamental risk no system fully eliminates.
Where I diverge: the FCM model isn't the solution. I've been inside major bank FCM operations. Some stay solvent through massive overcollateralization and luck. Infrastructure is archaic - systems held together with institutional gaffer tape.
FCMs can't onboard crypto-native entities. DAOs, foundations, trusts, new generation Asian market makers, family offices - they don't fit the traditional intermediary model.
Many international markets provide direct clearinghouse access to diverse participants with risk-based rules. This isn't experimental - it's how established markets work outside FCM oligopolies. Even the largest allow direct access for big enough entities.
Real-time settlement only realizes value through real-time clearing - with proper waterfalls, delayed liquidation options, and sophisticated risk models.
Critical US policy question: taxpayer exposure if clearing fails. Answer must be zero, but not by forcing crypto into FCM-only models.
Institutional buy-side struggles to access these markets through traditional intermediaries. New infrastructure should enable them, not create barriers.
Tokenization is coming across all asset classes. Existing clearinghouses need new technology. Web3's efficiency promise becomes real through infrastructure, and clearing is foundational.
Appreciate Don and Chris advancing this conversation. More is possible than today's models without increasing systemic risk.
We need better infrastructure, not less innovation. More sophisticated clearing, not 1995 templates. 24/7 global markets need infrastructure designed for that reality.
At Pascal we want to help build that future, but it requires an ecosystem - regulators, exchanges, participants, and infrastructure providers together.
The recent stress test showed what doesn't work. Time to build what does.