Bloomberg: CFTC is Hesitant to Approve Bakkt’s Bitcoin Futures

Since Bakkt, a cryptocurrency initiative backed by the Intercontinental Exchange (ICE) — the New York Stock Exchange’s parent company — was announced, it has been widely anticipated. In fact, pundits across the board have claimed that the startup, intended to be the first platform to offer physically-secured Bitcoin (BTC) futures, will be what boosts the cryptocurrency market out of its doldrums.

As CNBC analyst and industry investor Brian Kelly remarked: Bakkt is the “biggest (crypto) news of 2018.”

But, a recent report claims that Bakkt has fallen on hard times, as regulators aren’t exactly too pleased with what they’re seeing.

Bitcoin Futures Exchange Bakkt Still In Search Of Green Light

Bloomberg, citing those familiar with Bakkt’s operations, recently remarked that the U.S. Commodity Futures Trading Commission (CFTC) isn’t all too excited with Bakkt’s proposal. This isn’t exactly hearsay. When ICE and its partners announced Bakkt in Q3 of last year, they issued a tentative November/December 2018 launch date for Bakkt’s Bitcoin futures contract.

As you all know, the semi-deadline came to pass and Bakkt failed to launch, and another delay, this time to January 2019, was instated. This deadline, too, didn’t hold its water. And now, the expected date of Bakkt’s inaugural trading session is unknown.

Although Kelly Loeffler, the chief executive of the exchange, didn’t explicitly pin his firm’s sluggish nature to the CFTC, she and sources have mentioned that the firm is still working with the financial regulator. This, of course, implies that there are concerns over the details of Bakkt’s futures and offerings.

Bloomberg’s insiders would confirm this conjecture. The people familiar told the outlet that the CFTC is primarily concerned with how the cryptocurrencies of Bakkt’s clients would be held in the vehicle of the proposed physical futures, as BTC needs to be stored to back the contracts.

It isn’t clear why the CFTC is taking issue with Bakkt’s custodial design, as it does have big-name backers in ICE itself, industry fund and merchant bank Galaxy Digital, Microsoft’s venture capital arm, and other prominent tech, finance, and blockchain names.

There is a possibility that the exchange hacks, like the very recent DragonEx, Bithumb, and Cryptopia cases, is irking the governmental entity, as Bloomberg’s sources did mention how the Bitcoin stored would be safeguarded “from possible theft and manipulation.”

However, Bakkt, likely now under a time crunch (the firm’s financiers are reported to have access to a “get-out” clause to withdraw their investment), is purportedly attempting to somewhat skirt these concerns.

It was claimed that instead of a green light from the CFTC, Bakkt is looking for a stamp of approval from New York’s regulators, which have historically been stringent but cautiously amicable towards Bitcoin-related ventures. This would allow Bakkt to secure BTC and other digital assets for its clients, while potentially setting the stage for a fully-fledged “go-ahead” from the CFTC.

Why Bakkt Is So Important

All this begs the question: why exactly is Bakkt so important? Well, as explained by the Ironwood Research Group’s Mike Strutton in a Youtube post published last year:

 “With Bitcoin futures coming from Bakkt, they are physically backed, meaning that Bitcoin is going to be purchased and removed from the market and warehoused in their platform for the duration of those contracts. And they are doing these (contracts) in one-day transactions and they are not doing any leverage or margin trading on them.”

For those who aren’t catching onto Strutton’s train of thought, if Bakkt’s futures gain traction in a retail and institutional setting, thousands, if not tens of thousands BTC will begin to leave the open market en-masse. This is something deemed bullish by analysts across the board, simply because of simple supply-and-demand mechanics.