Bakkt Clears Regulatory Hurdles, Plans to Launch Physically-Settled Bitcoin Futures This Fall

Bakkt, a subsidiary of the Intercontinental Exchange (ICE), has announced it has received necessary permissions from the CFTC and the NYDFS to launch its “institution-grade” platform for physically-settled bitcoin futures trades September 23rd.

“One year ago, we announced our ambitious vision to bring institutional infrastructure to digital assets with an end-to-end regulated marketplace,” Bakkt CEO Kelly Loeffler writes in a company blog post. “That vision will be realized on September 23 when Bakkt launches custody and physically-delivered daily and monthly bitcoin futures contracts in partnership with ICE Futures U.S. and ICE Clear US.”

Numerous crypto trading platforms in the US have been racing to become the platform of choice for coveted institutional money and interest many believe is needed to legitimize crypto and push Bitcoin and other token prices to new heights.

ICE runs the New York Stock Exchange and numerous other global financial and commodity exchanges and clearinghouses, including ICE Clear US, ICE Clear Europe, ICE Clear Singapore, and The Winnipeg Commodity Exchange, etc.

The company maintains offices in many global financial centres, and in this regard, has an advantage over crypto startups new to the field.

Loeffler highlights this in her announcement:

“(B)y now, digital asset markets are global and well-developed, but they have largely been designed to serve retail customers rather than institutional participants. Bakkt is bridging that gap to access this market and solve for factors that have slowed institutional participation.”

One issue that has dogged numerous firms seeking licenses or approval in the US to offer crypto-derivatives products is persistent news of inflated trade-volume reporting from unregulated crypto platforms, as well as ongoing stories of fraud and market manipulation.

Bakkt’s says its Bitcoin futures will be exchange-traded on ICE Futures US and cleared on ICE Clear US, both of which are federally regulated by the CFTC.

The CME and Gemini are now using composite indices of data from several more reputable crypto trading platforms, but Loeffler says Bakkt will use its own spot index:

“Uniquely, Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement prices, thus serving as a transparent price discovery mechanism for the benchmark price for bitcoin. The importance of this differentiator is only amplified by reports of significant manipulative spot market activity, and other concerns such as inconsistent anti-money-laundering policies and weak compliance controls.”

In March, the Cboe (Chicago Board Options Exchange) abandoned Bitcoin futures, but did not say why.

Earlier this month, the CEO of a crypto derivatives trading platform called LedgerX issued a “profanity-laced” tirade on Twitter after the Commodity Futures Trading Commission contradicted the company’s widely-touted announcement that it had become the first crypto-derivatives platform in the US to launch physically-settled bitcoin futures contracts to retail investors.

LedgerX later claimed its announcement had been misconstrued by the cryptomedia.

Overall, providing secure trading of cryptocurrencies has proven quite difficult

Many trading platforms have been hacked and user funds stolen, and several state-sponsored hacking groups are believed to be behind some of the worst, hundred-million-dollar hacks.

Bakkt says it is, “setting a higher standard, including an institutional compliance and anti-money laundering program, settlement prices that are distinct from unregulated spot prices, comprehensive market oversight, a guaranty fund contribution and insurance.”

But even ICE has experienced technical problems with its digital trading interfaces.

According to The Wall Street Journal, a “glitch” affecting the data feed on the NYSE caused what appeared to be a “calamitous” drop in the price of Vanguard Group retirement funds this week.

Another 19 indices were also reportedly affected.

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