Intercontinental Exchange (ICE) have faced a bit of a setback as their plans to launch a Bitcoin Futures has been stopped by regulators.
Bakkt, the proposed futures service, was initially supposed to launch in November 2018 but ran into trouble with the Commodity Futures Trading Commission (CFTC). According to reports, the issue that the CTFC had with the proposed project was that they intended to act as custodians for their clients’ bitcoins. This stalled the launch and another round of discussions between ICE and the CTFC began, this time with the commission requiring that Bakkt’s business plan be made public as well as a mandatory public comment period.
ICE was not satisfied with those demands, and the dispute is yet it be resolved, which puts the future of Bakkt in limbo.
From all indications, there is no immediate way to resolve this matter but it is rather telling about how regulators both in and out of the United States handle crypto as an asset class.
When ICE refused the demands of the CTFC, it was because they found them unreasonable and unnecessary. However, the CTFC demanded them because they do not know how to treat crypto assets. This is because crypto as an asset class is rather new and regulations regarding them aren’t quite as developed.
In many cases, the go-to response on the part of regulators is to try and enforce rules that belong to other asset classes. The problem with this is that they do not take the unique nature of crypto into account and thus, end up doing more harm than good.
Taking a look at ICE’s plans, they have stated that settlement of futures will take place on a daily basis. This means that investors will have the option to either accept Bitcoin from Bakkt at the end of the trading day or have Bakkt hold on to it for them. This would be dependent on how trades had fared that day. Also, Bakkt would be collecting collateral from investors in the form of fiat currency.
These situations pose a problem for the CTFC because they are into used to dealing with firms that operate in that manner. The good news is that this may serve as a teachable moment for all involved. ICE might, With time, be able to resolve their differences with the CTFC and the commission can use this as an opportunity to develop better regulations for the crypto industry so as to avoid such problems in the future.