Following an earlier decision to halt withdrawals, cryptocurrency exchange CoinFlex has revealed it would raise funds by issuing new tokens. According to a whitepaper released on Monday, this new token, the “Recovery Value USD” (rvUSD), will offer a 20% annual percentage rate (APR). Although, that will be accrued and paid daily in rvUSD.
Essentially, this is all part of efforts to offset a $47 million debt that one of the high-profile clients of the exchange has failed to repay.
CoinFLEX to pay off debt and solve withdrawal problems
Recall that following a broader market decline and a debt within its platform, CoinFLEX announced a withdrawal freeze last week. However, in a bid to quickly restore normalcy, the platform is launching Recovery Value USD (rvUSD) tokens today, with hopes of resuming withdrawals by June 30. CoinFLEX also confirms that the issuance of the new tokens will likely run up until July 1.
Speaking about how long the purchase of the new rvUSD tokens might take, the CEO of CoinFLEX, Mark Lamb says:
“We have been speaking to potential large buyers and believe there is significant interest in the terms presented.”
So from all indications, it appears withdrawals may resume on the CoinFLEX platform as soon as June 30. However, that may be dependent on the amount of funds realized from the purchase of the rvUSD tokens.
Meanwhile, CoinFLEX has hinted about the client that necessitated the withdrawal freeze in the first place. The exchange confirms the individual to be a “high integrity” person who is merely facing liquidity issues at the moment. For what it’s worth though, there certainly are a lot of liquidity issues around. And this is a result of nothing other than the recent crash of the crypto market.
Possibilities of a bank run?
In situations like CoinFLEX’s, there usually are genuine concerns about a potential bank run. This happens when many clients withdraw their money from a bank within a short period. And it usually happens because of fears that the bank may cease to function soon.
However, Mark Lamb has again dismissed those possibilities. He assured that clients may withdraw their funds as much as possible, immediately after the new token fundraiser is complete.