By CCN: Intercontinental Exchange’s high-profile Bitcoin project, Bakkt, has faced severe pushback from the CFTC due to a fundamental concern about how its cryptocurrency assets will be stored. In response, Bakkt is looking to obtain a BitLicense and manage custody of the coins themselves.
Unfortunately for ICE and associates, BitLicenses can take years to receive.
New York’s BitLicense: A Historically Slow Process
Bitcoin companies have often waited years for New York’s DFS to approve their BitLicense applications. | Source: Shutterstock
As CCN reported, Bitstamp waited over three years to receive a BitLicense, which give crypto firms permission to operate in New York. The state’s Department of Financial Services has picked up the pace of issuing BitLicenses, but all the same, fewer than 20 have been issued to date. About two dozen companies filed applications after the BitLicense was announced in 2015, and not all of them have received responses yet. More have filed since then, but there’s no telling how long it could take for their approval or denial.
Of course, being the owner of the New York Stock Exchange might help Intercontinental Exchange cut through the red tape and get to the front of the line. It wouldn’t be the first time an insider company had managed to obtain regulatory approval ahead of everyone else.
The world’s first “Bitcoin bank,” itBit, pursued a banking license while everyone else waited for BitLicenses. They later received a BitLicense as well.
The gambit paid off, as itBit was for a time one of the few entities with the legal right to do business in the Bitcoin space in New York. ItBit operates under the Paxos brand, the same company that issues Paxos Standard.
Bakkt will offer a multi-faceted approach to spreading Bitcoin adoption. On the one hand, their futures contracts will pay out in BTC. This will be a departure from current futures offerings that are settled in cash. For another, they’ve got several corporations including Starbucks on board for retail-oriented solutions.
Again, obtaining a BitLicense is not a quick process. It’s unclear why ICE thinks this route would be faster than just waiting for approval from the CFTC.
BitLicense May Be The Fastest Way to Get in Business for Bakkt
Bakkt was launched by ICE, the owner of the New York Stock Exchange (NYSE). | Source: Shutterstock
However, the company will need a BitLicense to operate its services in New York anyway. BitLicense requirements are extensive, but they also limit the types of cryptocurrencies that a firm may offer. According to Bloomberg, the CFTC recognizes state licenses, so the thinking is that they could go through a self-certification process for providing futures if they acquired a BitLicense.
The process has already taken quite a bit longer than ICE expected. The company initially planned to have its first cryptocurrency futures offerings in place by last November, but they continue to run smack into roadblocks and delays.
Regulation for Bitcoin entities is burdensome across the board, with a Bitcoin ETF continually delayed over concerns about the falsification of market data. The most recent application was based on just 5% of all reported volume, in hopes that by disregarding potentially or known-to-be fake volume, the government could trust the ETF operator to reflect market data accurately.
