Bakkt’s application with the NYDFS is seen as a possible gateway to get regulatory approval from the CFTC.
The launch of ICE’s Bakkt platform is facing several roadblocks despite the company initiating several measures. The Bakkt announcement in August 2018 created huge euphoria in the crypto community. However, regulatory hurdles have caused the crypto exchange to delay its plans several times.
According to a Bloomberg report on Thursday, April 18, Bakkt is now seeking to get a license for the custody of Bitcoin from the New York Department of Financial Services (NYDFS). Note that with the Bakkt trading platform, it also plans to launch the Bitcoin Futures contracts.
Furthermore, Bakkt’s Bitcoin futures would be physically settled contracts. Meaning, upon expiry of the contract, customers will get physical Bitcoin tokens delivered to their wallets. Hence if it has to custody Bitcoin for its customers, Bakkt needs an official license for the same.
Bakkt’s Regulatory Roadblock
Over the last five months, Bakkt has been trying to persuade the Commodities and Futures Trading Commission (CFTC) to get a license for Bitcoin futures. However, it has been having a hard time convincing the regulator. So what’s holding CFTC from approving a license to Bakkt.
According to CFTC’s regulatory rules, clearinghouses should deposit their funds at a trust company or a bank. But currently, Bakkt is neither of the two. Also, Bakkt’s idea of using Bitcoin for retail transactions might not go well with the CFTC considering high volatility of the crypto token. Bakkt’s recent application with the NYDFS could create a gateway for the exchange to get a CFTC approval.
Despite these regulatory hurdles, Bakkt CEO Kelly Loeffler assures that they are working on further developments for the platform. In a March 29 post on Medium, Loeffler said:
“While we’re not yet able to provide a launch date, we’re making solid progress in bringing the first physical delivery price discovery contracts for Bitcoin to the U.S., where price formation will occur in federally regulated, transparent markets.”
Recently, Bakkt announced that it plans to acquire some of the assets belonging to Rosenthal Collins Group (RCG). Earlier this year, Bakkt raised $182 million from 12 high-profile investors to continue further with its expansion plans. In January 2019, Bakkt also started hiring more people in anticipation of the launch of its platform.