Through the ICE, Bakkt is considering the possibility of obtaining a licence from the New York financial regulators for the direct custody of customers’ tokens.
In fact, it seems that the main obstacle that is imposing delays on the launch of the project is precisely the scepticism on the part of the Commodity Futures Trading Commission (CFTC) regarding the way in which the customers’ tokens will be stored and protected from possible theft and manipulation.
These assumptions come from three “fact-informed” people, who have though asked to remain anonymous because these are not yet public matters.
As a result, the ICE, the company that manages the New York Stock Exchange and owns Bakkt, should proceed with the application for this additional license from the State of New York, even if it will still be necessary to obtain the approval of the CFTC.
In other words, the direct custody license would be designed to make it more likely that the CFTC would approve it.
ICE’s plan is to create a highly regulated Bitcoin ecosystem that encourages pension funds and other financial institutions to invest money in these new digital assets in an easy and secure way.
To be able to do this, it needs to obtain the approval of the CFTC, which is slow to arrive precisely because of the problems related to the storage and preservation of tokens. Discussions between the management of Bakkt and the CFTC have been going on for months, but do not seem to be leading to concrete results.
Financial institutions are still very reluctant to buy bitcoins on unregulated platforms, so being able to offer a fully regulated futures contract, anchored to physical bitcoins, could potentially give these institutions a safer way to invest in these assets.
However, this makes it much more difficult for the CFTC to approve Bakkt’s futures than those already approved by CME and Cboe, which did not provide for any form of asset custody.
In this case, the rules would require clearinghouses to ensure that clients’ funds could be deposited with a bank or trust company: Bakkt is currently neither of these and would therefore not be able to obtain CFTC approval. The request for a custody license would serve to solve this problem.