After months of going through the regulatory maze, Bakkt announced on Thursday they are to start user acceptance testing for bitcoin futures.
We’ve asked for further details on what this testing means exactly, but it appears to suggest they are effectively to launch physically settled bitcoin futures, but will start with few select number of people/companies.
Does that then mean they have the regulatory go ahead? Adam White, COO of Bakkt, only says:
“Recently, Bakkt announced that we’ll support the ICE Futures U.S. launch of daily and monthly margined futures for bitcoin by bringing regulated custody as part of the futures contract.”
He doesn’t say anywhere “pending regulatory approval” perhaps because it looks like as far as CFTC is concerned they can now move forward.
A Long Road to a Moonshot?
Bakkt was planing to launch last December, but it appears some legal technicality was holding them back.
“The regulator’s rules require clearinghouses to deposit customer funds at a bank or trust company, and Bakkt is currently neither of those things..
The CFTC recognizes state bank and trust licenses, and could let ICE list futures through a self-certification process if it obtains permission from New York’s Department of Financial Services [NYDFS] to hold tokens, said one of the people.”
On or around May 3rd, NYDFS said Articles of Organization of BAKKT TRUST COMPANY LLC (TR-CM) filed for examination. On May 17th, they said Articles of Organization received on May 1st.
That doesn’t tell us much, but on May 13th, Bakkt’s parent company, ICE, filed with CFTC for self-certification of bitcoin daily and monthly futures.
CFTC had 10 business days from the above date to raise an objection or to stay the self-certification for a 90 days review period.
They did not do so. Had they raised any such objection or stay, there would have been a press release to the effect as there was for another unrelated matter concerning Gold and Silver futures.
Meaning Bakkt appears to have the go ahead from CFTC, with it now to operate as a trust as stated in its filing:
“Deliveries under the Bitcoin Contracts will be made through Bakkt Trust Company LLC (the “Warehouse”), which has applied to be licensed as a limited purpose limited liability trust company by the New York State Department of Financial Services.”
NYDFS says “our regulations specifically state that we are receptive to chartering proposals.” They further cite the standard clause:
“The corporation is to exercise the powers conferred by Section 100 of the Banking Law. The corporation shall neither accept deposits nor make loans except for deposits and loans arising directly from the exercise of the fiduciary powers specified in Section 100 of the Banking Law.”
In other words, the trust is meant to only hold bitcoin on behalf of others, with this chartering process seemingly in place only to ensure that it’s not a rogue operator.
NYDFS has not made any announcement that they have issued such license, but from all the previous actions by Bakkt last month and this month, it appears this is more of a formality with NYDFS required to be receptive to such applications, which we take to mean they have to grant them unless there is an extremely good reason not to do so.
Hence why perhaps CFTC did not require Bakkt to wait until a license is received before applying for self-certification, with it appearing they have the regulatory greenlight, so perhaps explaining why they are to start testing.
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