The Intercontinental Exchange (ICE) is working hard to bring bitcoin to the public, but has been facing resistance from federal regulators in the United States. Now, ICE is turning its attention to state regulators to seek permission from New York financial regulators. A person familiar with the matter said that the CFTC recognizes state banks and trust permits, and that if ICE is licensed by the New York Financial Services Department, it can allow ICE to launch Bitcoin futures through a self-certification process.
ICE's plan is to create a highly regulated bitcoin ecosystem that encourages pension funds, endowments and other institutions to invest more in this area and make it easier for consumers to purchase cryptocurrency products. Last August, ICE partnered with Starbucks and Microsoft to create a global platform and ecosystem of digital assets called Bakkt. However, due to skepticism of the US Commodity Futures Trading Commission (CFTC), the project's release date has been delayed for several months. According to people familiar with the matter, the CFTC's biggest concern is how to store customers' tokens and prevent possible theft and manipulation.
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- A picture to understand the difference between Bakkt's bitcoin futures and "traditional" futures
Three people who asked not to be named said that ICE is currently considering permission from the New York financial regulator to allow Bakkt to keep its own tokens. If ICE is licensed by the State of New York, it still needs the CFTC to approve Bakkt's broader business. Bakkt CEO Kelly Loeffler said last month that the company is in talks with the CFTC and that the plan is moving steadily.
A spokesman for ICE and CFTC declined to comment.
In theory, Bakkt will face two major obstacles: high-net-worth investors are mostly reluctant to invest in cryptocurrencies, and consumers rarely use cryptocurrency. In the past 16 months, these problems have become more serious, because Bitcoin once fell more than 70%.
ICE is trying to attract institutional investors by offering physical delivery of bitcoin futures, while current CME and Cboe bitcoin futures are cash settled.
In fact, institutions have been hesitant to buy bitcoin on current unregulated platforms. Therefore, bitcoin futures contracts offered by ICE may provide a safer investment path for mutual funds and donations.
Bakkt will also promote retail transactions by providing Starbucks and other companies with a platform to easily convert Bitcoin into US dollars. Taken together, these capabilities are critical to ICE's plan to enable consumers and institutions to buy, sell, store and use digital assets on a seamless, global network.
From the perspective of the CFTC, this goal makes Bakkt's business far more complex than the bitcoin futures that CME and Cboe launched at the end of 2017.
Regulatory rules require the clearing house to deposit client funds into banks or trust companies, and Bakkt does not currently do so. According to two people familiar with the matter, some of ICE's Wall Street partners are not enthusiastic about participating in the Bitcoin business.
A person familiar with the matter said that the CFTC recognizes state banks and trust permits, and that if ICE obtains permission from the New York Financial Services Department, it can allow ICE to launch Bitcoin futures through a self-certification process. The source said that the CFTC will not regulate the spot market of Bitcoin, but it may still ask the public to comment on Bakkt or set up an ICE expert group to assess the risk of approving futures contracts.
ICE originally planned to launch bitcoin futures in November last year. Loeffler published a Medium article on March 29 stating that the company is continuing to work with CFTC, which will eventually trade and liquidate on the ICE platform and be regulated by regulators.