As ICE Pushes For Bakkt Bitcoin (BTC) Custody License, CFTC Approval Looks To Be On The Horizon
As ICE Pushes For Bakkt Bitcoin (BTC) Custody License, CFTC Approval Is Imminent
The Intercontinental Exchange (ICE) has announced the creation of a Bitcoin futures platform last year called Bakkt. It has been a long road since then. The platform, which was expected to start working at the beginning of the year, is still awaiting the approval of the U. S. Commodity Futures Trading Commission (CFTC) in order to operate legally.
ICE, which also owns the New York Stock Exchange (NYSE) is pushing forward the approval, though, as they want to register Bakkt in New York, a very important region. The company is also reported to be working with the Bank of New York in order to store the security keys of the cryptocurrencies that it will hold for its clients.
Bitcoin Custody Plans?
It seems that the platform will be useful for more than only futures. ICE has acquired the Digital Asset Custody Company (DACC) recently, which means that the company might also enter the custodial game.
Adam White, currently acting as the COO of Bakkt, has affirmed that the acquisition would play an important part for the company in their physically-backed BTC futures. The platform already has support for 13 blockchains, which let it store over 100 assets. All the people from DACC will be integrated into Bakkt soon.
This is the second company bought to be integrated with Bakkt. The first one was the Rosenthal Collins Group (RCG), an independent company focused on being a commissions merchant.
With the new acquisition, Bakkt is clearly shaping up to be one of the most interesting institutional options and it will offer both futures and custody options for clients. More trusted platforms have to emerge in the industry as even platforms like Binance are being hacked, which show that the crypto market is not as secures as it wants to be.
Bakkt also seems to be following the same path as other companies like Circle, which is backed by Goldman Sachs, and Coinbase. All these companies are starting to focus more on custody lately.
Now, ICE is looking at some company which is already registered as a trust in the state of New York, which would certainly speed things up, compliance-wise. By being legally qualified to do all that, the company hopes to finally convince the CFTC to approve the platform.
A Different Approach On Custody
It is fair to notice that Bakkt has somewhat changed its approach to custody during the process of trying to become more compliant with the CFTC. For instance, the company would originally use a warehouse to store digital assets and now it is changing to physical custody.
While the company affirmed that the plans were not changing, they actually were. The first reports filed by the company specifically mentioned warehousing and not the custody solutions which are set to be used now.
There is a probability that this might have happened because the company is facing unexpected difficulties since its futures will not be settled with cash but with BTC, unlike that CME and CBOE are doing right now. This is quite different from the standard process in the country so the CFTC may have required Bakkt to change some aspects of its services in order to be approved.
Since ICE is not really a bank, Bakkt may have hit a regulatory wall because of the 1936 Commodity Exchange Act, which needs a trust or a bank to make the kind of transaction that Bakkt wanted to do.
It’s All About Getting The CFTC Approval
It is certain that the people behind Bakkt did not expect the CFTC to be so hard when it came to finally give the company the approval that they needed so badly. The original launch time was around December 2018, but almost six months have already passed and nothing happened.
The launch was originally postponed to January 2019, but the company failed to get the approval and had to delay again. Cointelegraph, which reported on this story, affirmed that one of the main concerns was to actually that ICE would settle its BTC futures using the ICE Clear US (ICUS) and that this did not sit well with the CFTC, despite ICUS being a regulated clearinghouse.
Oversight over clearinghouses has gone up lately by the CFTC, so the company probably understood that they needed a better solution in order to finally be approved. Also, cryptos fall into a very grey area of the regulation, which may have concerned the regulator. They are a new asset class, so they are slower in regulating them not to make a mistake.
Cointelegraph talked with Damon Leavell, the senior director of marketing of the company, and discovered that the team is still officially focused on building the foundation of its business, despite all the hurdles with the CFCT
It seems, however, that the people behind Bakkt took so long to get so far because of compliance issues with custody, as this is still one of the grayest areas in the market today. Passing this, the road ahead should be smoother.
Bakkt To Launch Its Platform In July 2019
So, when will Bakkt be finally launched? In July 2019, around eight months after the original date, it seems. According to a new blog post released by the company, this is the new official date.
The company has already consulted with the CFTC and started to work to have everything ready by then. Bakkt will still want to use ICUS as well a self-custody, but there was no word on what the CFTC thought of that and whether the company would still need to change its plans again.
No more information was published on when the clients would be able to start the testing of the platform, though.
The CEO of Bakkt, Kelly Loeffler affirmed that the platform will prove both daily and monthly physically-settled Bitcoin futures for its clients.
Is this story finally reaching its end or, better, it is beginning? That seems to be the truth. Bakkt is certainly one of the most awaited platforms and it is bound to have a big impact in the crypto market, so we are all waiting eagerly.