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The competition just got a lot fiercer for Intercontinental Exchange (ICE), the parent of the New York Stock Exchange, as a new crypto exchange joins others in the race for physical Bitcoin futures.
It will be recalled that ICE has been working closely with the CFTC for a while now, with the hope to get approval for physical Bitcoin futures. The firm announced last year that they have completed their first fundraising and are ready to launch the ‘Bakkt’ project. But the launch was delayed yet again because they are yet to get ‘green light’ from the CFTC. Well, other firms such as Eris Exchange LLC and the new kid in the block – CoinFLEX – do not plan on waiting around for ICE or the CFTC.
This was disclosed in an interview with Bloomberg where Mark Lamb, co-founder of Coinfloor and the CEO of CoinFLEX, announced that CoinFLEX is ready to start offering futures trades for Bitcoin, Ethereum, and Bitcoin Cash form Feb. 2019.
CoinfloorEX, now known as Coin Futures and Lending Exchange (CoinFLEX), was a unit of Coinfloor – a U.K.-based crypto exchange. The defunct CoinfloorEX is now owned by a consortium which includes big industry players such as Global Advisors, Alameda Research, Roger Ver, Dragonfly Capital Partners, and Trading Technologies International Inc. The Hong Kong-based CoinFLEX intends to trade physically delivered Bitcoin futures that can be leveraged up to 20 times. This is a direct competition with BitMEX which holds a substantial presence in Hong Kong.
A point in favor of CoinFLEX is that all futures traded on the firm would be physically delivered. This is a great relieve for investors who are scared of price manipulation (commonly referred to as banging the close) during the time of a future’s expiry. With such a contract, there would be no chance to influence the settlement price as the investors would be paid with cryptocurrencies instead of cash.
According to Lamb, settlement price manipulation due to lack of physical delivery has been the reason for the stunted growth experienced in the market. With physical delivery, crypto derivatives could become an order of magnitude larger than spot markets as investors would no longer reduce the volumes they invest. CoinFLEX intends to trade against Tether as a stablecoin. Futures’ parties who are short at the future’s expiry would deliver Bitcoin and receive Tether. This is as opposed to the current system of receiving cash as payment.
Unlike Coinfloor, which has been seeking regulations from the U.K.’s Financial Conduct Authority, CoinFLEX would be regulated in the same manner as BitMEX. The exchange would be incorporated in the lightly-regulated archipelago Seychelles. Commenting on why the new crypto exchange chose to go offshore, Lamb explained that it is the best card to play to gain trust from traders across the globe. Regulation by one country would pose some barriers which would eventually drive fear or distrust in the trading space.