Editor’s Note: Adam Sharp is away on vacation this week (though he’ll undoubtedly still check CoinMarketCap every day). So Andy Gordon is filling in.
Dear Member,
When Bakkt gets its government approval, it will mark a turning point for the crypto community. And, yes – I said when, not if.
News came out yesterday that Intercontinental Exchange’s (ICE) Bakkt and the Commodity Futures Trading Commission (CFTC) are still at loggerheads over a key issue that’s holding up regulatory approval.
The CFTC’s rules require clearinghouses such as Bakkt to deposit customer funds at a bank or trust company. Bakkt is neither of those things. Nonetheless, it has held discussions with the CFTC, exploring ways that Bakkt could act as its own custody warehouse.
One of the options is for Bakkt to register as a trust company. The biggest hang-up going down this road? It would be extremely time-consuming.
But the CFTC recognizes state bank and trust licenses. So Bakkt’s shortest route to becoming a registered trust would be to get a license from New York financial regulators that permits it to hold custody of customers’ tokens. The CFTC could then let Bakkt list futures through a self-certification process.
Bakkt is reportedly seriously considering this option.
The process to get approval is much longer than Bakkt first anticipated. It was originally scheduled to debut around last November. Then late January. But then the government shutdown happened. And on December 31, ICE announced the January 24 deadline would not be met and a new deadline would depend on “the CFTC’s process and timeline.”
Once Bakkt gets its New York license, it’s still not a done deal. The CFTC is likely to require public comment on Bakkt. That would extend the process by several more months.
The good news is Bakkt is showing no signs of giving up or scaling back its ambitious vision.
It still wants to create a new platform that will allow investors to buy, trade and store cryptocurrency on a federally regulated market. CEO Kelly Loeffler says Bakkt will “serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets.” Its first offering will be daily, physically settled bitcoin futures contracts.
Because Bakkt is federally regulated and backed by ICE, an organization held in high regard by institutional investors, it should pave the way for pension funds, endowments and other institutions to invest more money in the space. It will also facilitate retail transactions by providing Starbucks and other businesses a platform to easily convert bitcoin into dollars.
The venture has also lined up big-name backers, including Pantera Capital, Horizons Ventures, Starbucks and Microsoft.
These delays are frustrating. But Bakkt is not backing down. It’s going to have a huge impact. The wait is just longer than expected.
Good investing,
Andy