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CFTC Commissioner Says Sheer Pace of Fintech Has Stalled Bakkt Type Approvals

CFTC Commissioner Says Sheer Pace of Fintech Has Stalled Bakkt Type Approvals

CFTC Commissioner Christopher Giancarlo believes that the current period of innovation makes it challenging to approve proposals like Bakkt.

The U.S. Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974, that regulates futures and options markets.

Bakkt had promised prospective clients it would request permission from the CFTC to provide the first Bitcoin futures that would be physically deliverable daily, as well as storing clients Bitcoin in a physical warehouse on their behalf. The CFTC suggested that Bakkt registers as a trust company to circumnavigate stalling compliancy issues.

With the news that the Intercontinental Exchange (ICE), the owners of the New York Stock Exchange, is now attempting to facilitate the launch of its delayed Bakkt platform by obtaining a New York cryptocurrency license, the complications that new crypto projects face are a sign of the times according to Giancarlo, who clarified the difficulties:

“The first is that we live in a period of exponential technological change. That is, the sheer speed of innovation has increased exponentially, both in terms of production of new models and products and their subsequent public adoption.”

Giancarlo makes it clear that the pace of change within the industry means that regulators simply can’t catch up with new innovations without what he calls “heightened technological literacy across leaders in business and government.”

However, he points out that cryptocurrency innovation could have saved the 2008 global financial crisis, commenting, “Today I want to take stock of the current state of blockchain technology and renew a focus on how it can impact – and improve – our markets,” adding:

“But imagine what a difference it would have made a decade ago on the eve of the financial crisis if regulators had access to the real-time trading ledgers of large Wall Street banks, rather than trying to assemble piecemeal data to recreate complex, individual trading portfolios.”

 

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Bakkt Gets Creative with NY Crypto License

Bakkt Gets Creative with NY Crypto License

The Intercontinental Exchange (ICE), owner of the New York Stock Exchange, is attempting to facilitate the launch of its delayed Bakkt platform by obtaining a New York cryptocurrency license to seemingly bring about a more favorable outcome, according to Bloomberg’s report.

The much-lauded physically delivered Bitcoin futures platform – Bakkt – which is expected to further the adoption of Bitcoin to both institutions and retail investors, has been delayed for five months, with currently no date set for launch, as CEO Kelly Loeffler hinted:

“While we’re not yet able to provide a launch date, we’re making solid progress in bringing the first physical delivery price discovery contracts for Bitcoin to the .S, where price formation will occur in federally regulated, transparent markets.”

The delay has been for the most part due to custody concerns from the Commodity Futures Trading Commission (CFTC) which considered the custody infrastructure currently in place to be inadequate. Moreover, the regulator’s rules require clearinghouses to deposit customer funds at a bank or trust company – none of which Bakkt is, according to the report. Although, the CFTC had earlier suggested Bakkt register as a trust company to circumnavigate the concern.

CFTC had granted Chicago Mercantile Exchange Inc (CME) and the Chicago Board Options Exchange (CBOE) self-certification based on the fact that they settled their futures contract in cash, unlike in the case of Bakkt where settlements will be in Bitcoin, which raised the initial concerns of custody given the nature of asset theft in the cryptocurrency industry. Moreover, the regulator alongside CME and CBOE agreed to significant enhancements to protect customers.

ICE hopes a New York crypto license will influence the regulator’s decision positively, given that the license grants the Bakkt platform permission from New York’s Department of Financial Services to hold tokens.

In the background, the Bakkt project continues to develop as it grows its workforce as well as acquire asset relevant to its development.

 

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Bakkt Delayed Over Bitcoin Custody Concerns

Highly-anticipated cryptocurrency platform Bakkt has run into trouble with the US Commodity Futures Trading Commission (CFTC) over its custody plans for clients’ Bitcoin.

Bakkt promised prospective clients it would request from the CFTC permission to provide the first Bitcoin futures that would be physically deliverable daily, as well as storing clients Bitcoin in a physical warehouse on their behalf.

However, according to sources familiar with the matter, the CFTC has said that Baakt’s custody protocol would need to take further steps in protecting the cryptocurrency in order to be compliant the commission’s rules. It said they would ”require disclosures of the venture’s business plan and a public comment period, which would have further delayed approval.”

The CFTC has suggested Bakkt register as a trust company to circumnavigate these issues, although it was claimed this could be a time-consuming process and the firm wishes to minimize any further delays. Initially scheduled for a November 2019 launch, several issues with the CFTF have pushed the debut back.

A spokesperson for Bakkt told the Wall Street Journal: ”We are working through the regulatory review process and are looking forward to updating the market soon.”

 

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Ethereum Futures Contract: Net Sentiment Appears Positive

Ethereum Futures Contract: Net Sentiment Appears Positive

The United States Commodity Futures Trading Commission (CFTC) is currently reviewing entries from its Request for Input on Crypto-Asset Mechanics and Markets initiative set up last year aimed at collecting information about Ethereum and the resulting impact of a futures contract based on the digital asset.

After reviewing 43 entries, of which 29 of them seem to provide credible insights into the subject matter, an overall assessment may be that of positive sentiment towards an Ethereum-based futures contract. Of the entries, industry experts such as members from the Ethereum Foundation, Coinbase, Consensys, Circle, Craig Wright, ErisX, among others had provided their opinions about the stance of Ethereum in comparison to Bitcoin – which already has an approved futures contract running.

Highlights from the entries included describing the nature of Ethereum as being essentially a smart contract decentralized application (Dapp) creator first, before being considered a store of value or as a medium of exchange.

The Ethereum Foundation clarified that the intrinsic designs of the Ethereum network are “not financial in nature but simply use the blockchain as a source of high-assurance computation and data storage”.

Circle emphasized on Ethereum’s medium of exchange value: “As with Bitcoin, Ether can be used to pay for transactions and can be used for payments. Unlike bitcoin, tokens on the Ethereum network can be generated using smart contracts and can be used in smart contracts and transfers.”

Another comparison described Bitcoin as simply a store of value and medium of exchange, while with the nature of Ethereum’s versatility, the risks scale alongside, as the Futures Industry Association (FIA) opined: “With the Ethereum Network’s architecture, risk management is potentially more complicated than for Bitcoin by orders of magnitude…”

On the other hand, when the regulator asked about the impact of an approved futures contract on the asset itself, ErisX offered its opinion, suggesting that it would have a more positive impact on the growth and maturation of the market. It believes a futures contract will provide “the potential for greater liquidity, more effective price discovery, and more efficient risk transference”.

Although other players in the industry may have had slightly more critical views about the Ethereum network, the compromise did come at a shared view from larger players on more regulatory oversight on the industry.

The first obstacle to a second official cryptocurrency futures contract in the United States may have been scaled when the Securities and Exchange Commission (SEC) said Ethereum won’t be regulated as security. The second important milestone is an approval from the CFTC, which was initiated when the regulator asked for public opinions about the Ethereum network. CBOE plans to launch an Ethereum futures contract currently awaits the regulator’s approval.

Bitcoin futures contract were launched by Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) in late 2017, which had a compelling effect on the crypto market, taking it to new all-time highs at the time. One major sentiment in the market is that more derivative contracts would have a similar effect on the market. As such, an approved Ethereum futures contract in the US may bode well for the Ethereum support community since the asset’s market value has depreciated by as much as 94.2% at some point; and currently, its price has dropped 89.6% since it’s last all-time high.

Although cryptocurrency exchange BitMEX currently offers an Ethereum futures contract quoted in Bitcoin and has been receiving positive patronage in recent times, still, the market could be set up for an explosive uptrend should the CFTC grant its approval to the CBOE exchange.

 

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US Commodities Trading Commissioner Suggests Self-Regulatory Crypto Approach

US

The US Commodities and Futures Trading Commission (CFTC) seems to be considering a self-regulatory approach towards cryptocurrencies as commissioner Brian Quintenz has brought up the idea of self-regulation in a first. Quintez said that the members of the crypto community could create a self-regulatory structure during a Bipartisan Policy Center panel.

More specifically, Qunitenz believes that the US CFTC’s lack of crypto statutory oversight capability left some room for the cryptocurrency community for a self-regulatory effort. He believes that “platforms come together to form some type of self-regulatory structure where they can discuss, agree to, implement, and hopefully examine or audit”.

Quintenz hopes that such a self-regulatory organization can carry out necessary audits in areas of self-interest, business conduct, liquidity status and much more. However, he also poured cold water on the issue of CFTC or other regulator allowing the authority of such a body because he stated that “a self-regulatory organization is specifically chartered by the US Congress through the law”. So, while Congress remains undecided on the matter, it may be some time before we can see an actual regulatory effort from the crypto industry.

While CFTC is one of the few federal regulators that have been legally allowed to regulate the cryptocurrency space, it is good to see the one member believing in a self-regulatory effort similar to Japan’s successful one with the Japanese Virtual Currency Exchange Association (JVCEA).

 

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Intercontinental Exchange Lists More Details Ahead of Delayed Bakkt Launch

Intercontinental Exchange Lists More Details Ahead of Delayed Bakkt Launch

Bakkt has announced more details of its Bitcoin futures contracts, which was due for launch on the 25 January but suspended until a later date pending regulatory approval.

The Intercontinental Exchange platform will be offering physically delivered daily futures contracts in BTC/USD using the exchange’s own electronic trading platform following the launch later this quarter.

The new post from Intercontinental Exchange has listed more details.  The trading screen product name for the futures offered will be “Bakkt BTC (USD) Daily Future” and 1BTC in size. Its price will be set in US dollars up to two decimal places. The minimum price fluctuation is expected to be around USD 2.50 per contract, reducing to 1c per bitcoin on block trades of 10 BTC or more. There is no upper limit planned on daily prices with exchange and clearing fees of 50c per side of a trade.  A limit of 100,000 lots in any one contract date will be enforced.

The Bakkt Bitcoin Futures will trade on Eastern Prevailing Time between 20:00 and 18:00, with a pre-open at 19:55. Daily settlements will be scheduled between 16:58 and 17:00 each day. Delivery of the futures contracts will be overseen by a custody solution named Bakkt Warehouse.

Bakkt’s platform is now waiting for approval from the Commodities Futures Trading Commission (CFTC) and once this final regulatory step is given a green light, it appears that Bakkt will be ready for the opening as all the operational procedures have already been finalized and published for traders and investors.

It is thought that Bakkt’s entry into the cryptocurrency market with an open platform for all manner of cryptocurrency services, including trading and warehousing could be another carrot for institutional investors, and consequently trigger a Bitcoin recovery in 2019.

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Bakkt Announces $182.5 Million Funding Round, Launch Set for Early 2019

Bakkt Announces 2.5 Million Funding Round, Launch Set for Early 2019

In a blog post yesterday, institutional grade digital asset platform Bakkt announced the successful first seed funding round of USD 182 million.

According to the blog post, fourteen investors and partners were listed to have participated in this round, out of which 12 of them had raised the sum. Big players in the traditional finance and fintech industry were mentioned, to include Intercontinental Exchange, Goldfinch Partners, Boston Consulting Group, Microsoft’s Venture Capital arm and Pantera Capital.

The Bakkt project has for the latter part of 2018 been touted as the platform to finally make way for mainstream institutional investors to get into the cryptocurrency game. The blog reads: “Our work today is centered on driving institutional access for digital assets, along with merchant and consumer uses.” The project also revealed that they have expanded the vision to drive mainstream cryptocurrency adoption for the everyday user by extending their partnership to companies like Starbucks.

The announcement also included a current status of the project such as “working closely with the Commodity Futures Trading Commission for the better part of 2018” in order to obtain “regulatory approval for physically delivered and warehoused bitcoin.” They have also “filed applications and the timing for approval is now based on the regulatory review process.”

Another relevant angle the project will tackle while working through the 2019 objectives will also include a focus on “opportunities to provide new infrastructure, including the industry’s first institutional grade regulated exchange, clearing and warehousing services for physical delivery and storage,” reads the blog post.

The project has delayed its launch twice in a row as another official publication reveals that the updated launch timeline which was set for 24 January 2019 will be amended and set for early 2019, in line with CFTC’s process and timeline.

The blog post also revealed as many would agree, that 2018 was indeed an active year for cryptocurrency with Bitcoin at the center stage as volatility index peaked, as well as a notable increase in investment from venture capitals in distributed ledger technology and digital assets.

Many analysts and cryptocurrency enthusiasts have opined that the coming of the Bakkt will play a crucial role in restoring the market from the year-long bearish trend.

 

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Nasdaq Bitcoin Futures Confirmed

Nasdaq Bitcoin Futures Confirmed

Just last week, Bitcoin News reported Bloomberg’s findings on the world’s second largest stock exchange’s plan on moving forward with Bitcoin futures listing. This week, Nasdaq has cleared the air of all speculation by confirming this.

UK news outlet Express heard it from the horse’s mouth yesterday that Nasdaq would definitely be launching its Bitcoin futures within the first half of next year. This was obtained from two credible inside sources from within the organization.

Vice president of Nasdaq’s media team Joseph Christinat told an Express point man: “Bitcoin Futures will be listed and it should launch in the first half of next year – we’re just waiting for the go-ahead from the CFTC but there’s been enough work put into this to make that academic.”

Christinat added, “We’ve seen plenty of speculation and rumors about what we might be doing, but no one has thought to come to us and ask if we can confirm it, so, here you go – we’re doing this, and it’s happening.”

The current market trends might just be in need of a good news as this, in particular, is of more interest to institutional investors. However, this has a way of rippling into other mainstream financial affairs. The most likely of all institutions to feel the most impact would be traditional banking institutions, as the move will enlighten them on the serious roles cryptocurrency has in the future of finance. More so, it may be a step closer to legitimizing the market.

From Joseph’s statement, it would seem that they are no strangers to the development of both the blockchain technology and the cryptocurrency market, as he does emphasize on the efforts of the exchange toward engaging with the new venture.

“We got into the blockchain game five years ago, and when the technology first popped up we just leaned out of the window and shouted “hey come over here” right at it.”

However, the most assuring is that the exchange has spent so much on achieving this milestone:

“We’ve put a hell of a lot of money and energy into delivering the ability to do this and we’ve been all over it for a long time – way before the market went into turmoil, and that will not affect the timing of this in any way. No. Period. We’re doing this no matter what.”

Right now, all that’s left for the exchange is the final confirmation from the CFTC. This would also be the case with other players who are currently looking to launch their Bitcoin futures too. In the case of VanEck partnering with SolidX for a physically-backed Bitcoin exchange-traded fund (ETF), they are simply waiting on the US Securities and Exchange Commission (SEC) for approval.

 

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Nasdaq Full Steam Ahead on Bitcoin Futures, New Target Q1 2019

Bloomberg has reported that Nasdaq Inc has decided to move forward with its plans to list Bitcoin futures and this could happen as soon as the first quarter of 2019.

Nasdaq is following up on its initial plans in November 2017 to launch Bitcoin futures in 2018, doing so in the hopes of sustaining a long-term cryptocurrency patronage. However, it failed to execute its original plans, committing to satisfy the standards imposed by the US financial regulator Commodity Futures Trading Commission (CFTC).

Bitcoin futures were thought to be instrumental to the astronomical rise of the price of Bitcoin last year, with the market registering price verticals as high as USD 20,000. The first two derivative markets to launch the bitcoin futures were CBOE Global Markets Inc and CME Group Inc, after which the CFTC decided to review the processes for listing crypto derivatives.

Nasdaq’s decision comes as a bold move considering the current market conditions, as Bitcoin has dropped from its all-time high and now trades as low as USD 4,000.

The current market conditions seem to have fallen short of the initial expectations that institutional investments attracted by the Bitcoin futures contract would be the sustaining wave for the next cryptocurrency mass adoption. However, this year’s market has only been in the reverse. Still, institutional investments remain a topic of focus as speculation on them make headlines daily.

Moving forward, it does seem as though Nasdaq had been brewing on its plans to ensure that it meets the demand of a wide range of investors and ensure that its contracts services are foolproof, thereby outpacing its competitors. This was disclosed by an unnamed source reported by Bloomberg who said:

“The Nasdaq futures will be based off the Bitcoin’s price on numerous spot exchanges, as compiled by VanEck Associates Corp… CME uses prices from four markets, while it’s just one at Cboe.”

On a general note, Nasdaq has shown a keen interest into blockchain technology as a whole alongside the derivative systems, even considering the possibility of a Nasdaq cryptocurrency exchange in the future.

 

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Identification, Tax, Self-Regulation Named Emerging Trends in Crypto Regulation

Ex-senior official at the US Commodity Futures Trading Commission (CFTC) Jeff Bandman recently shared his expectations on the future of cryptocurrency regulations, pointing to identity checks, a clearer tax obligation, and industry self-regulation as trending areas.

Bandman said that a turning point for cryptocurrency regulation came in 2013 when the US government auctioned off the substantial amount of confiscated Bitcoin seized in dark web outlet Silk Road’s closure.

”When the US government seizes narcotics they don’t auction it off to the American people, to me that was a real watershed moment,” he said, interpreting this as the government’s acknowledgment of it as something legal.

KYC, AML

The area where Bandman sees greatest conversions is that surrounding around anti-money laundering (AML) and terrorist financing. Although he acknowledged that people are laundering at higher levels with cash than cryptocurrencies, he cites that statistically GBP 100 billion is estimated as launder in Europe every year, with around GBP 3 or 4 billion of that laundered in cryptocurrency. ”That’s still a lot and governments around the world are focusing on that,” he clarified.

”It’s a big theme as we go through 2018 and in to 2019… country by country mainstream departments of finance and justice will be handling this alongside an international group called the Financial Action Task Force which will have new standards by June.”

For businesses in this space, compliance to tighter regulation will be a core theme; ”whether or not you think its appropriate considering other certain software or consumer products are subject to KYC (know your customer) or AML at this level, it will be the defining characteristic for these types of assets.”

Taxes

Bandman noted that taxing cryptocurrency came to the US government’s attention in 2013, 2014, although there was and still is no consistent treatment globally. Each country is trying to deal with taxation, albeit in different ways, he said with the common denominator being a lack of clarity and consistency.

He gave the example of France’s intention to impose a 20% capital gains task on cryptocurrency which taxpayers are still unclear of on the logistics; whether it relates to corporate income or just capital: ”If buying a coffee with Bitcoin is there going to be gains or losses in that transaction or is that an exemption?”

”Crypto businesses and retails need a clear taxonomy. Some products such as airdrops and forks are novel compared to other taxable assets,” Bandman shared, suggesting that a clearer taxation policy is crucial for supporting national industries.

Exchange platforms

With the trading landscape rapidly evolving, Bandman pointed to the US as going particularly quickly in this area of regulation partly because of the country’s extremely broad definition of a security and investment contracts.

Other regions benefit trading because their definitions are not so broad: ”In the EU, the definition of security generally excludes most cryptoassets. In the US, cryptoassets must comply with securities laws for the most part with exception of sufficiently decentralized coins like Bitcoin and Ether. Other countries have developed a bespoke framework, such as Gibraltar and Bermuda which have provided a specific framework for virtual currencies.”

Japan, however, is the nation that Bandman sees as setting the future trends for exchange regulations. He described Japan as ”leading the world” since giving specific authority to its financial market regulator to market cash or spot trading of cryptocurrencies. Now it has just authorized the first self-regulatory organization which gives trading platforms authority to police themselves.

”These are very important elements for trends in the landscape moving forward,” he concluded.

Bandom established and chaired the CFTC blockchain, virtual currency, and fintech working group from inception, serving with the CFTF from 2014-2017. He now lectures at Yale University and acts as Founder and Principal of Bandman Advisors.

His comments were made at Decentralized 2018, a blockchain conference that took place in Athens, Greece last week.

 

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