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October 16, 2018

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Shedding Some Light on Bakkt’s Delayed Launch

April 22, 2019


When moon now seems to relate less to the overall crypto prices and more to the launches of platforms like Bakkt. Unlike the crypto craze of 2017, it would seem that over time, the blockchain industry has become less fraught with wild speculation and more focused on real-world use cases that could elevate the industry’s user base to new heights.


Arguably, this shift in focus could not come at a better time as events like the de-listing of certain assets like Bitcoin SV have raised questions about the scope of crypto exchanges’ power. For one, where does their influence stop?


Consider how we buy our crypto now. Almost every purchase is made on an exchange and most users use cryptocurrencies specifically for trading or “Hodling” and nothing else. Perhaps the best example of this are statistics like those that were posted by the Bitcoin Market Journal in February of this year.


Reportedly, as of December 2018, only around 32 million Bitcoin wallets were live and of those wallets, 7.1 million were actually being used. When considered alongside the power of crypto exchanges, what these numbers tell us is that the blockchain industry is very early-stage and needs more use cases that help it to scale.


Right now, those who know of crypto at all, likely know it for its’ trading utility. If an effort like Bakkt could finally go live, the number of people that are interested in cryptocurrencies and become actively involved in them might change skyrocket. If you don’t already know, Bakkt is a platform that aims to be the one-stop shop for institutions to get involved in cryptocurrencies.


What is hoped is that since interested businesses will be able to store, trade, and convert cryptocurrencies to fiat all in one place. This includes being able to trade in Bitcoin futures-contracts. Most importantly, since Bakkt has been created by the parent company of the New York Stock Exchange, they likely do have connections with regulators that will help them to cover all of the necessary bases in a legal sense.


If you’re wondering why crypto enthusiasts would eagerly await the launch of this project, consider the fact that Bakkt has predicted they will essentially create a new $270 billion market for crypto. Since, judging by Coinmarketcap, the current total market cap of all cryptocurrencies is only about $180 billion, this would represent more than a doubling of the industry’s total liquidity.


The problem is: regulators just can’t seem to make up their mind about Bakkt. According to CoinDesk’s latest report, this comes down to Bakkt’s goal of holding client assets in-house, while also clearing trades in-house, which means they would control essentially every aspect of the market they create.


Perhaps agencies like the SEC and the CFTC fear some sort of monopoly? Though little information seems to have been gleaned from both the regulators involved and Bakkt itself at this time, CoinDesk reached out to Chris Giancarlo and gained some insights on the matter.


Reportedly, one of the biggest stumbling blocks for Bakkt is how the CFTC is used to regulating futures. Apparently, when any business that trades in futures operates in the United States, it is considered to be a derivatives market, which means the custody of its’ assets is handled by certain government agencies. In other words, an institution that wants to facilitate the trading of futures contracts while also holding the assets involved, needs to be fully regulated by law. As Coindesk notes via Giancarlo, since Bakkt reportedly is not, this would mean that the CFTC would have to set a precedent or an “exception” for it.


In the end, until this central issue is solved in a way that satisfies both the CFTC and Bakkt, it is likely that the widely heralded futures exchange platform will not be launching anytime soon.




By: BGN Editorial Staff


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