The crypto exchange platform specializing in physical futures found a solution to its withdrawal problem: launch a new token.
CoinFLEX, a crypto derivatives exchange that revealed last week that it was stopping withdrawals, is looking to address its ongoing liquidity issues with a new token.
The Hong Kong-based platform highlighted on June 23 that it was suspending all withdrawals due to unfavorable market situations and uncertainty surrounding a specific counterparty.
The unrevealed counterparty, which CoinFLEX described, was not the struggling crypto hedge fund Three Arrows Capital or any crypto lending firm. This counterparty had reportedly entered unfavorable fields by being unable to comply with $47 million in debt.
Now, the exchange has new strategies to release an innovative token to raise funds in a bid to restart withdrawals for its customers. All after the mystery customer couldn’t pay off the massive debt.
CoinFLEX Finds a Solution
In a blog post on Tuesday, CoinFLEX explained that it had found an improving solution to its struggle: tokenizing debt. The company revealed the creation of a new digital asset valued at USD 47 million that will give its holders a juicy annual yield of 20%.
According to the whitepaper highlighted by Crypto Briefing, CoinFLEX customer debt repayments would get converted to USDC, and rvUSD holders would convert their tokens to USDC on a redistributed basis as new refunds get done. Available only to exclusive investors outside the US, rvUSD will start its circulation this week.
CoinFLEX explained that it would automatically liquidate insolvent positions, but the trader had a clause in their account that did not allow this action to take effect.
The entity refused to name the investor but they said the investor is a good person with cash-strapped issues linked to the recent downtrend affecting the markets and with significant holdings in various private unicorn entities.
Insolvency Struggles in the Sector
By dealing with the new rvUSD tokens, CoinFLEX hopes to raise enough funds to cover the deficiency on its books left by the investor and resume withdrawals for users. Although the plan focuses on the expectation that the investor will pay, it is something that would not happen, as CNBC highlighted.
In an interview with Bloomberg, the platform’s CEO had shown confidence that the trader will pay the entity in the future. Likewise, when asked about the possibility of bankruptcy, Lamb said that he is not afraid of such a panorama since customers can withdraw their funds once the new token fundraising reaches its completion.
Lamb also said that CoinFLEX intends to increase transparency for future positions, the notional value of accounts, and margin. It will use a third-party auditing firm to do so. The exchange expects to resume withdrawals on June 30 but is still up to receiving funds.
By: Jenson Nuñez
