Crypto futures exchange OPNX has launched a credit currency for margin trading, according to a July 5 statement made to Cointelegraph from the exchange’s co-founder, Mark Lamb. Called “oUSD,” the currency is available in its “phase 1” iteration, meaning that users cannot receive it without depositing crypto assets into the exchange.
In a future “phase 2” version, the platform intends to make oUSD available to users who deposit crypto into on-chain contracts to allow for possible “bankruptcy remoteness,” Lamb stated.
In the currency’s litepaper, oUSD is identified as a solution to three problems. First, lenders do not want to trust platforms to hold cash loans backed by crypto collateral. Second, exchanges and lending platforms don’t want to lend cash to margin traders, as this practice led to multiple bankruptcies during the 2022 bear market. Third, crypto derivatives traders want “portfolio margin,” or the ability to borrow and trade based on their crypto holdings rather than their stablecoin holdings.
To solve this problem, oUSD exists as a “credit currency.” It can be purchased at a 1-to-1 ratio with Tether (USDT) or used to measure profit and loss when users rely on Bitcoin (BTC), Ether (ETH) or other cryptocurrencies as collateral. Users with a negative oUSD balance must pay an interest rate determined by holders of the platform’s native token, OX. Users who have a positive balance cash out by redeeming it for USDT.
In a conversation with Cointelegraph, Lamb claimed that users would eventually be able to acquire oUSD by staking cryptocurrency within smart contracts outside the platform. This will allow them to have bankruptcy remoteness, protecting them from any possible insolvency at the exchange.
“The problem with most exchanges is that [...] you’re the broker, the exchange, the ATS, the reporting agent, you're every leg in the financial interaction," Lamb stated, further explaining:
“If we can instead remove that custodial aspect and put that custody on-chain, we end up with a system where users have provable solvency, and they know that their collateral is not being touched. [...] And so you give users that bankruptcy remoteness, that protection of their assets, they then are able to trade on a safer exchange.”
Related: Kyle Davies to donate future OPNX earnings to 3AC creditors for ‘karma’
OPNX has been controversial since its inception, as two of its co-founders, Kyle Davies and Su Zhu, were also the co-founders of failed hedge fund Three Arrows Capital. The exchange has been so heavily criticized that its CEO, Leslie Lamb, has scolded investors for allegedly misleading the public by distancing themselves from it.
In response to a question about this criticism, Lamb argued that Davies’ and Zhu’s mistakes have helped them make OPNX a better exchange.
“I think Kyle and Su kind of portrayed the zeitgeist of the last crypto bull market well, and they lost the majority of their net worth, but they are building back, and that’s what I am doing as well, and that’s what everyone should do, [...] is just build back.”