OKX Floki Loan: Exchange Explains Auto-Exchange Trigger

Cryptocurrency exchange platform OKX has addressed recent concerns regarding its FLOKI Pledge Loan Mechanism. The clarification follows remarks from on-chain arbitrageur CryptoWilson, who noted an unusual spike in trading volume for OKX’s Floki trading pair starting from August 29, 2024. This led to automatic purchases of Floki at higher prices and forced sales of collateralized BES loans.

OKX clarified that the automatic currency exchange occurs when the pledge risk rate seems secure. They explained their mortgage loan system operates as a customer-to-customer (C2C) market, matching depositors with borrowers. This system maintains a 100% reserve principle.

An automatic coin exchange triggers when the platform’s borrowed amount equals its deposited amount. This mechanism considers all users’ borrowing and depositing activity. The system prioritizes automatic currency exchange for users with the highest borrowing amounts to manage overall platform risk.

OKX also addressed why new borrowing wasn’t halted to maintain normal levels. According to the platform, borrowing ceases when the borrowed currency equals the deposited currency.

The recent automatic currency exchange was due to extensive redemptions of Floki deposits caused by increased on-chain activities. This led to decreased deposited currency without a corresponding rise in borrowed currency, activating the exchange mechanism.

OKX responded to questions about the lack of advance notifications for affected users. They stated that users typically receive email alerts when automatic exchange thresholds are met. However, some users may have missed notifications due to email system issues. OKX encouraged affected users to contact their customer service for assistance.

OKX also announced plans to improve their notification system to ensure users receive timely alerts before automatic exchanges. Additionally, they will optimize their mortgage loan page to provide clear information about the exchange and liquidation process.

Despite the news, OKX’s native token, OKB, maintained a stable price. As of press time, OKB trades at $36.97, reflecting a slight intraday dip of 0.7%, per Coincodex data.