The cryptocurrency community has been waiting with bated breath in recent months, for news concerning the highly anticipated launch of Bakkt, a cryptocurrency trading and storage platform with plans to offer Bitcoin futures, settled in Bitcoin itself. It is expected that the futures contracts, which will be institutional grade offerings, will generate a large degree of interest in the cryptocurrency markets.
First announced in August 2018, Bakkt are not the first platform to offer Bitcoin futures, but they’ve become one of the most high profile offerings to date, as they are backed by American public company the Intercontinental Exchange (ICE). ICE also operates the New York Stock Exchange (NYSE) the world’s largest stock exchange by market cap.
After successfully raising $182.5 million from 12 investment partners, Bakkt are planning to launch two futures contracts, one daily settlement Bitcoin futures which will allow customers to transact in a same-day market, and another Bitcoin futures contract settled monthly.
Although Bakkt had originally planned to launch their first futures product in November 2018, the offering from ICE has cited regulatory hurdles as a reason for postponing Bakkt several times – with the official launch date still undefined, although the first live futures contracts are expected to arrive within the coming months.
On May 13th 2019, Kelly Loeffler, CEO of Bakkt, announced that Bakkt had listed their ‘Bitcoin Daily Futures Contracts’ with the U.S. Commodity Futures Trading Commission (CFTC), as a new product pursuant to Section 5c(c)(1) of the Commodity Exchange Act and Regulation.
The application states that Bakkt’s Bitcoin futures will be listed on a federally regulated futures exchange, and Bitcoin Contracts will be cleared by ICE Clear U.S. Inc (ICUS), ICE’s own clearing service which has been used for traditional asset futures for over 100 years. This, however, may be a major sticking point for clear regulation from the CFTC for Bakkt.
This is likely because futures contracts offered by other exchanges, such as CME group, have traditionally been settled in cash, whereas Bakkt’s decision to offer Bitcoin settled futures requires special consideration and lengthy consultation between Bakkt and the CFTC, as to how the cryptocurrency will be stored and cleared.
So far, Bakkt have taken a
measured approach to regulation, stating that the challenging crypto
environment strengthens the need for sound regulation, and it would be better
to work with regulators rather than rush a product to market which was not
On this issue, Bakkt COO Adam White stated that the pace of regulatory approval is “set by regulators”, and Bakkt is working constructively alongside the CFTC to advance the regulatory process.
Bakkt continue to work closely with the CFTC to navigate regulatory hurdles, and are currently preparing for user testing of futures and custody features, which is expected to start in July 2019.