The bilateral problem in crypto margin

In crypto derivatives today, every exchange runs its own clearing. Your margin sits in isolated silos. You post collateral at Binance, at OKX, at Deribit, separately. None of it nets against the rest.

That is the bilateral problem. Every counterparty relationship requires its own margin. The capital cost scales with the number of venues you trade on, not with your actual net risk.

Centralised clearing changes the economics entirely. A single clearing layer between counterparties means offsetting positions reduce your margin requirement rather than duplicating it. If you are long ETH perps on one venue and short on another, those positions net. Your margin reflects the residual risk, not the gross exposure.

In practice, the difference is not marginal. In traditional derivatives, multilateral netting through CCPs routinely reduces margin requirements by 80-90% compared with bilateral arrangements. The more participants in the network, the more offsetting flow, the greater the netting benefit for everyone.

The second effect is counterparty risk. In bilateral, if your counterparty defaults, you are exposed to whatever they owe you. In cleared, default risk is bounded. You are exposed to margin plus fees, not to an open-ended counterparty claim. That is the structural difference between infinite tail risk and a capped, quantifiable exposure.

Crypto has the bilateral problem in its most extreme form. Every exchange acting as its own clearing function, no cross-venue netting, no multilateral risk reduction. The capital inefficiency is enormous and it is the single biggest barrier to institutional participation at scale.

And then there is ADL….. The worst solution.

We can do better.

This first appeared on LinkedIn on 13 March 2026. If you want to comment or discuss, that’s the place.