The whole industry appears to be looking forward to the launch of Bakkt, which was first announced in August to be a bitcoin trading and custody platform.
The CFTC has already received a proposal, which includes an exception to allow for custody the Bitcoin involved in the futures contracts. Though the commissioners were given this proposal at the end of last year, it is back at their desks, which does not look like a good sign.
Typically, when these proposals are on the desks of the CFTC, they undergo a mandatory 30-day public review period, but nothing appears to be happening at the moment. The exchange has no way to launch the futures contract they have proposed until it has been approved by the CFTC, which only happens after the review period.
With no indication of a review period and no status changes from the CFTC, is anything even happening?
It is been six months since Bakkt was publicized as the project from Intercontinental Exchange (ICE). The plan was originally to launch the Bakkt platform in December, which clearly did not happen. The delays began, first until January, and then indefinitely. The only update that ICE has given the public at this point is that the former target date will be changed, “pursuant to the CFTC’s process and timeline.”
Since the first quarter of the year is nearly over, there still has yet to be any release on the proposed exemption for the public comment. Even if the proposal was released today, the launch will not occur until at least mid-April, due to the 30 days that have to take place for the public to review and comment on it. By the end of last month, the project was still being reviewed.
Even though the shutdown for five weeks clearly did nothing to help, it is not the only component that matters in the delays. According to CoinDesk, the “ambitious nature” of Bakkt’s plans is to blame, considering that the futures contracts may be at risk for manipulation, which is a major concern for cash-settled contracts.
An unnamed former CFTC staffer said that, usually, commodity futures exchanges would involve themselves with a service provider like a bank or trust. The provider would manage the custody as the clearinghouse determines.
The bank or trust becomes the location of the settlement, but the asset would be provided through the clearinghouse, abiding by the policies of the federal or state government. The staffer added that it looks like Bakkt is working on approval from a third-party warehouse.
Based on the current information that has been released to the public, the proposal could end up falling outside of the need for oversight at the federal and state level. Without having more information, the issue could be due to “novel and complex” approach.
Another source had said in December that the proposal from Bakkt to custody bitcoin for clients with its own warehouse has gone from the staff of the agency to the commissioners but reports from CoinDesk suggest that this is not the case anymore.
The source said that it not unheard of that proposals go from the Commissioner to the staff, especially if the direction of the proposal is not going the way that they prefer. When the commissioners were questioned about Bakkt, they continually turned back the attention to the work that the regulator has done on “actual delivery,” which the CFTC has had an issue with.
Right now, it looks like Bakkt is working to build out the product, along with its systems. Two months ago, Kelly Loeffler, the CEO, said that the company was working to purchase select assets from a futures commission merchant named Rosenthal Collins Group. The assets included former employees, and it was finalized the following month.
For Loeffler, the acquisition focuses on the fact that the Bakkt platform is not remaining in the same place that it was at when the proposal was submitted. Still, Loeffler was unable to provide any indication of when Bakkt will launch.
So far, Bakkt has provided no additional comments, but the chief operating officer Adam White spoke on the work that the platform has been doing with the regulators, and the highlighted need to be patient.
He noted that the regulators are moving at a speed that “they are comfortable with,” and that their actions are “protecting the public.”