By CCN: Bakkt, the moon-shot bitcoin bet of trading behemoth Intercontinental Exchange (ICE), still can’t get approval from the U.S. Commodity Futures Trading Commission (CFTC). Many now believe its hopes depend on getting a much-hated BitLicense from New York.
Are U.S. regulators trying to kill Bakkt?
Congress makes the laws. If the laws suck, Congress is supposed to fix them. Regulators exist solely to make sure everybody follows the laws.
In this case, the laws suck, but that’s not the CFTC’s fault.
The Problem With Bakkt
The CFTC says Bakkt should follow rules for commodities that need somebody to deliver and store actual physical products for traders. Think corn and copper, “real” things that take up actual space.
Those rules are designed to protect traders from theft and manipulation. For example, when corn dealers fluff the bushels or copper dealers fudge with the purity.
Certainly, this doesn’t make sense for cryptocurrency. You can’t debase cryptocurrency or dupe the blockchain.
Bakkt would prefer not to carry the costs and complexities that come with those outdated rules, but what can it do? Rules are rules, and the CFTC must enforce them.
Does this mean Bakkt is doomed?
The CFTC understands the rules don’t make sense, and it’s working with Bakkt to figure out a solution.
In response to the CFTC’s foot-dragging, Bakkt is pursuing a BitLicense from the state of New York.
This will take a long time, but it may solve the whole problem. Once it has a BitLicense, Bakkt can ask the CFTC to approve its bitcoin futures under a process that recognizes state banking licenses.
While this might sound really complicated, remember that government agencies can’t create laws. Congress does that. CFTC can only do what the law says.
Bakkt is Undeterred
Bakkt continues moving forward. Earlier this year, it raised $182 million in private investment capital, acquired part of Rosenthal Collins Group to improve its administrative operations, and cemented a long-rumored partnership with Starbucks. It just hired Google and PayPal vet Mike Blandina to join an executive team that features former top officials from Coinbase, WorldPay, and ICE.
Nobody’s ever done what Bakkt’s trying to do: create a massive, regulated, global cryptocurrency exchange with a full suite of enterprise-grade investment services, fiat-to-crypto-to-fiat payment services, and secure storage of cryptocurrency assets.
Bitcoin futures are the first step, but Bakkt’s ambitions go much further. It’s building a top-notch trading infrastructure tailored for the unique needs of cryptocurrency traders. Additionally, it’s run by a highly regarded parent company boasting a long history of success. Most importantly, its backers have lots of money and powerful political connections.
It will open. It may take a little more time than you’d like, but it will open.
Let’s hope it’s worth the wait.