CoinFLEX Issues rvUSD Token to Cover for Investor’s Default on Debt

Coin Futures Lending Exchange (CoinFLEX) on Tuesday issued a new token called Recovery Value USD (rvUSD).

The token, whose issuance will be halted on July 1, 2022, is targeted at covering the shortfall in the trading platform’s books.

According to CoinFLEX, the issuance price for the token is 1 USD Coin for 1 rvUSD.

With the maximum amount to be issued pegged at 47 million rVUSD, it means that the trading platform is trying to raise $47 million from the token issuance.

According to a whitepaper on rvUSD published by CoinFLEX, only non-US resident sophisticated investors are eligible to buy the token.

The crypto platform further disclosed that rvUSD attracts a 20% annual percentage rate (APR) that is paid daily in rvUSD.

Withdrawal and Negative Equity

CoinFLEX last week halted withdrawals for users of its trading platforms.

In a blog post published on Monday, Mark Lamb, CoinFLEX’s Chief Executive Officer, explained that the platform decided to suspend withdrawals after the account of a “long-time customer” went into negative equity.

This means that the customer’s account is holding a  negative balance 
Negative Balance

In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader places a trade that sharply goes against the chosen direction, an account can incur negative balance. Such exposure is traditionally very risky for brokers. While the foreign exchange market is the most liquid market in the world, unexpected economic, geopolitical or cataclysmic events can always cause a market disruption and consequently lack of liquidity.This has occurred during certain events, albeit limited, which have resulted in extraordinarily sharp movements over short timeframes such as the Swiss National Banking Crisis in early 2015.Negative balances are addressed in many jurisdictions globally and clients in the EU…