CoinFLEX , a Hong Kong-based cryptocurrency futures exchange has landed a $10 million war chest from Bitcoin.com chairman Roger Ver, Polychain Capital, NGC Ventures and Divergence Digital Currency. The exchange is expanding its service to offer physically delivered bitcoin futures contracts for the Asian market.
CoinFLEX CEO Mark Lamb stated that his exchange is now the world’s first exchange to offer a physical delivery for Bitcoin (BTC) futures contracts. According to Lamb, the bitcoin market is facing a steeper challenge of handling price manipulations and the launch of a physically-settled bitcoin futures contract is meant to alleviate this challenge especially for retail investors and traders.
Lamb said that “Professional and retail traders alike are affected by price manipulation in the cash-settled futures market. In physically delivered contracts, anyone long at expiry receives the underlying bitcoin. There are no formulas involved.”
Physically settled bitcoin contracts will allow the traders to receive the underlying coins once the contract expires which means that the coins that were stated at the start of the contract are the same coins that will be delivered. There is no conversion of the coins involved in the settlement which is unlike most markets in the United States and other regions.
In fact, the only market available in the US is a cash-settled bitcoin futures contract market currently dominated by the Chicago Mercantile Exchange (CME). Several players in the US market have expressed interest in launching the physically-settled contracts to no luck so far. These include NYSE’s parent company’s bitcoin futures exchange called Bakkt, LedgerX, and ErisX. All have faced stiff requirements from the regulators. For instance, Bakkt was announced back in August 2018 with an initial launch date for November the same year. This was never to be as it pushed the launch date further to December, then to January 2019 then indefinitely.
The US financial markets regulator the CFTC had concerns about custody which will be necessary considering that the exchange will be settling in the underlying asset. Bakkt will be launching in September this year after securing the necessary licenses from both the CFTC and the New York Department of Financial Services.
Unlike Bakkt, however, CoinFLEX is targeting the retail investor similar to LedgerX. The retail investor is often prone to the price manipulations due to inexperience in trading as compared to institutional and professional investors.