Editor's Note: This article comes fromOn-Chain FinanceEditor's Note: This article comes from
On-Chain Finance
(WeChat ID: CaijingOnchain), author: Xi Xixi, reproduced by Odaily with authorization.
According to a recent report from CoinDesk, Bakkt’s plan to launch bitcoin futures trading has been delayed yet again. In fact, the launch of the Bakkt Bitcoin futures contract is not delayed again, but is in the third delay period. The main reason why March is regarded as a time node worthy of attention may be that, according to the previous media Abacus Journal report, some early Bakkt investors revealed that mid-March is the final approval period of the US Commodity Futures Trading Commission (CFTC). , so Bakkt is expected to be launched after approval in March.
Nasdaq had previously stated that it would launch Bitcoin futures in the middle of 2018, but this plan was postponed to the first half of 2019. Similar to Bakkt, it has no hope of going online before the first quarter of this year, and there is no further information.
Also recently, the Chicago Board Options Exchange (CBOE), as the first institution in the United States to issue bitcoin futures products, announced that it will no longer launch new bitcoin futures contract transactions from March this year.
Since Bitcoin entered the mainstream financial system in the form of futures, it has opened up a compliant way to obtain transactions in the regulated market, whether it is to boost market confidence, attract institutional investors, or promote the issuance of other digital currency financial products. He said that Bitcoin futures, as an investment product with approved precedents, have sent favorable trading signals to the digital currency market.
But now, the price of Bitcoin has experienced many rounds of severe setbacks. The mainstream financial system and regulatory attitudes are changing with the rapid changes in the market. Digital asset derivatives represented by Bitcoin futures are still facing challenges.
secondary title
Delay or the regulatory norm at this stage
Bakkt's much-watched Bitcoin futures initially planned to be listed in November 2018, but because Bakkt's one-day futures contract concept must obtain regulatory approval from the US Commodity Futures Trading Commission (CFTC), the initial launch plan was rejected. Postponed until December 12, 2018. Nearly a month later, Bakkt postponed the plan again to January 24, 2019 on the grounds of insufficient preparation.
After the proposal was submitted to the CFTC in December last year, it encountered a US government shutdown that lasted five weeks since December 22, 2018, which directly affected the approval process of US regulatory agencies such as the SEC and CFTC. This also means that Bakkt's Bitcoin futures trading plan has also entered this stage of indefinite delay following the Bitcoin ETF application that has been delayed by the SEC several times.
Now that the first quarter of 2019 is coming to an end, the CFTC has not announced its proposal so far, so it is impossible to enter the next step of soliciting public comments. According to the CFTC’s proposal review process, it is foreseeable that Bakkt will be launched before mid-April. slim. Intercontinental Exchange (ICE) chairman Jeff Sprecher mentioned in an earnings call last month that Bakkt is expected to launch later in 2019.
According to CCN’s report on March 21, CFTC Commissioner Dan Berkovitz responded in a conversation with BLOCKTV that he is currently stepping up his review of Bakkt’s proposal and emphasized that CFTC is not an anti-encryption or anti-blockchain agency, but he refused to disclose the approval. expiration date.
On the one hand, for exchanges, in addition to the necessary approval process and irresistible factors of government agencies, the process of waiting for the physical settlement futures contract launched by Bakkt to obtain regulatory approval is not entirely a matter of time.
Adam White, chief operating officer of Bakkt and former Coinbase executive, said at a recent derivatives conference held in Boca Raton, Florida, when talking about the cooperation between HKEx and regulators: "This world is not yours. Fill out an application and toss it aside, and then you can take it back and start your own business."
Although his statement is not directly related to the specific status of the current CFTC or Bakkt proposal application, but in terms of cooperation with supervision, the essential issues are basically the same. That said, this is not a process of unilaterally passively waiting for regulatory approval to accept.
On the other hand, for regulatory agencies, for a long period of time in the future, for the cryptocurrency field, the attributes, forms and inestimable huge risks of extremely complex digital financial products determine that the supervision of this field will be It will be a long and continuous dynamic process.
As CFTC Commissioner Dan Berkovitz stated, because the CFTC's regulatory structure faces unique challenges in dealing with decentralized blockchain technology, the distributed structure of blockchain means that regulatory goals and market participation are required. Regulators around crypto futures and options markets will likely take a while to develop, he said: “We’ve made a lot of changes in the financial sector. Our regulations are not extreme norms...we can do this without knowing exactly what the technology is. What are the conditions for adapting to new technology ... We have no clear rules for this."
secondary title
The "old and new" replacement of Bitcoin futures
As the first exchange to offer bitcoin futures, CBOE finally chose to stop trading bitcoin futures contracts more than a year after its launch. According to the general opinion in the industry, the main reason why CBOE stopped the trading of Bitcoin futures contracts is that its trading conditions are sluggish.
In December 2017, when domestic regulatory bans were tightened, in stark contrast, after obtaining CFTC approval, CME and CBOE reacted quickly and announced the launch of Bitcoin futures contracts one after another, while CBOE finally preempted CME , launched the world's first bitcoin futures transaction 9 days after being approved. After that, in addition to Nasdaq’s plan to launch bitcoin futures, Goldman Sachs and Morgan Stanley also planned to launch bitcoin futures trading and clearing services.
Shortly after CBOE and CME launched bitcoin futures contracts, the entire cryptocurrency market plummeted after reaching a historical peak, with bitcoin trading volume dropping by more than 80%. Some people in the industry believe that after the launch of Bitcoin futures trading, the price trend of Bitcoin fell from the peak. One of the culprits of the ensuing plunge in currency prices.
When the overall digital currency market suffered a sharp drop in 2018, the trading volume of XBT on COBE also continued to decline. According to the tradeblock.com chart, it has continued to fall from nearly US$2 billion in January 2018, and has never reached US$1 billion since May last year, and fell below US$500 million in September last year. By the end of 2018, the transaction volume Only about $250 million left. According to the latest report submitted by Bitwise to the SEC, CME’s bitcoin futures trading volume was $85 million, while CBOE’s bitcoin futures trading volume was only $6 million.
In addition, the trading volume of CBOE's bitcoin futures has been less than half of the trading volume of its competitor Chicago Mercantile Exchange (CME) bitcoin futures. Although the overall market has fallen, it can also be clearly seen from the tradeblock.com chart The difference between the two trade volumes. Yicai Global pointed out in the report that each of the CBOE XBT contracts contains only one bitcoin, while the CME BTC contracts each contain 5 bitcoins. are more attractive. In other words, being at a disadvantage in the competition of similar products is also one of the reasons why CBOE stopped bitcoin futures trading.
Under the gathering of various factors, the exchange itself is weak. With the suspension of Bitcoin futures, CBOE’s first round of exploration in digital asset derivatives has come to an end. CBOE’s test of Bitcoin futures seems to be no longer A case for reference.
After CBOE's Bitcoin futures (XBT) was successfully listed, CBOE has repeatedly submitted applications for Bitcoin ETFs to the US Securities and Exchange Commission (SEC), but it has not been approved for a long time. Currently, the proposal is waiting for the upcoming April On the 5th, whether the SEC will make a formal decision or continue to postpone.
Judging from the current trading situation of CBOE and CME Bitcoin futures, after briefly stimulating and promoting the market development, the expected market value of digital asset derivatives has not been fully released and continued.
CBOE's bitcoin futures is currently a typical bitcoin futures contract transaction settled in US dollars, while the bitcoin contract proposed by Bakkt is settled in bitcoin. The former is settled in cash, and both parties to the transaction only need to conduct futures transactions within the agreed time according to their respective price forecasts. The exchange finally only needs to post the difference between the real-time market price and the previous position established by the buyer after the contract expires. Cash delivery is sufficient. The latter is settled in kind and needs to be delivered in bitcoin, and there is real commodity delivery. Therefore, the bitcoin futures launched by Bakkt are considered to be bitcoin futures in the true sense.
At the same time, since all transactions and settlement processes do not really involve the buying and selling of bitcoins, there is no actual benefit to the circulation and application of bitcoins and the long-term development of digital currency-based economies.
Therefore, even though the digital currency market is deeply in a bear market, the further development of the market has not stopped there, and the launch of physically-delivered Bitcoin futures is only a matter of time.
secondary title
Realization Obstacles for Bakkt Bitcoin Futures
The CFTC regulates three heavily regulated services that are currently widely offered by exchanges: trading, clearing, and secure storage in the form of custody or warehouses. Bakkt, which has not yet been approved, is currently facing two of these regulatory hurdles.
On the one hand, in terms of trading, compared with the approved cash-settled bitcoin futures, the transaction of physically-settled bitcoin futures is more difficult, and the investment threshold is raised, which makes it more difficult to obtain regulatory approval.
The trading process of traditional futures trading has been clearly and detailedly regulated. Bakkt's physical bitcoin futures must also comply with the specific regulations of the exchange in terms of transaction methods, settlement guarantees, contract transfer or hedging, and risk management, especially in futures delivery. In terms of mechanism, the exchange needs to store a certain amount of bitcoin spot in the exchange for physical circulation among traders. Questions about whether these large amounts of locked bitcoins will cause currency price volatility or whether exchanges are difficult to avoid market manipulation have always existed since the beginning of Bakkt's appearance.
On the other hand, in terms of custody, professionals in Bitcoin futures believe that general physical delivery requires qualified warehouses identified by the exchange to store the designated delivery objects (for example, crude oil warehouses). The current BTC storage methods and custody , and there is no international standard, which is an obstacle to the realization of physical delivery futures.
Due to the existence of physical delivery, in order to monitor the delivery of futures contracts, Bakkt launched its own delivery warehouse ("Bakkt Warehouse") as a regulated custody solution, which is also considered to provide a digital asset security The storage solution helps to increase the possibility of Bitcoin ETF being approved.
When the market closes, the clearing house will transfer the funds from the buyer to the seller's bank account, and the BTC will be transferred to Bakkt's delivery warehouse, and the buyer can withdraw the BTC from the seller's lock box in the ICE warehouse. If crypto assets or funds are not delivered, the corresponding costs will be borne by the clearing house.
ICE Chairman Jeff Sprecher once said that the Bakkt trading platform’s own clearing house will be organized by some of the largest financial institutions in the United States to set up a risk committee to formulate platform rules, and in order to obtain government approval, these rules will try to meet the requirements of the US government’s approval .
In the CoinDesk report, a former CFTC employee pointed out that commodity futures exchanges generally use service providers such as banks or trusts. Contracts are settled in banks or trusts, and related assets will be hosted by clearing houses. “In my view, without more information, Bakkt is trying to get approval as a third-party warehouse like a silo, subject to clearinghouses and exchanges,” he said. Provisions".
The regulatory problem faced by self-owned warehouses is that the operating rules of self-owned custody warehouses and clearing houses launched by Bakkt try to be taken over by themselves under the premise of meeting certain regulatory requirements, and directly serve as third-party warehouses, thus providing services from trading to clearing and custody. full functionality. However, since there is no common standard for BTC storage and custody, this move, in the view of the CFTC, is likely to cause the company not to be subject to federal or state regulation, so this will also be an obstacle that Bakkt must face in the approval process.
Regarding the supervision of Bakkt's own delivery warehouse, Cai Weide said: "This is a technical problem. The emergence of Bakkt is to be supervised. This problem cannot be solved." Since Bakkt is backed by ICE, the parent company of the New York Stock Exchange, it has been advertised as regulatory friendly since its launch. Bakkt CEO Kelly Loeffler said at the CoinDesk Consensus Conference that what Bakkt brings to digital currencies is regulatory compliance. The system we developed The price transparency of digital currency can be realized. Institutional investors need certainty before entering the world of cryptocurrencies, and one way to achieve that certainty is through full compliance at the federal level, which is what Bakkt aspires to achieve.
Physical delivery seems to have only changed the delivery method of bitcoin futures in the past, but in fact, whether it is physically settled bitcoin futures itself or self-owned warehouse custody solutions, a series of supporting digital asset market infrastructure is involved behind it Compared with the rapid listing of CBOE and CME Bitcoin futures, it will be a long journey compared with the construction and improvement of market standards.
secondary title
Predicament and future
The digital asset market structure with decentralized transactions and lack of supervision cannot meet the investment requirements of institutional investors. In contrast, the investment demand for digital assets is growing day by day. In an interview with Bitcoinist last month, former Goldman Sachs partner and founder of Galaxy Digital, Mike Novogratz, believes that institutional money will start entering the cryptocurrency market within the next six to 12 months as custody solutions roll out.
Bakkt's first physical delivery bitcoin futures attracted great attention in the industry in 2018. Following Bakkt, the US futures trading platform Eris Exchange (ErisX) and the British cryptocurrency exchange Coinfloor's Hong Kong-based trading platform CoinFLEX also announced subsequently To launch bitcoin futures with physical delivery.
According to The Block, in a panel with ErisX CEO Thomas Chippas, Chippas pointed out that ErisX is a pure market infrastructure. Adam White, chief operating officer of Bakkt, said that Bakkt is not only a business that provides key institutional infrastructure like companies such as ErisX, CME and Seed CX, but also hopes to promote the wider application of cryptocurrencies. “It’s not enough for me to invest a lot of money in market infrastructure and hope that other people will understand why we use cryptocurrencies,” White said.
However, judging from the various market entry methods of Bakkt at present, in order to obtain regulatory compliance and market trust, Bitcoin futures, an investment product established for institutional investors in the encryption market, is only one of the key entrances that has yet to be opened, and Bakkt's attempt to promote bitcoin circulation did not stop there because bitcoin futures were delayed.
Bakkt's most eye-catching application scenario construction lies in its cooperation with Starbucks and Microsoft.
The cooperation with Microsoft is mainly in the aspect of Azure cloud computing service. Through the cloud solution provided by the data center controlled by Microsoft, it can provide retailers with cloud services ranging from processing invoices to e-commerce background tasks.
In August last year, when Bakkt announced its establishment, Starbucks was regarded as one of the initiators. On December 31, 2018, Bakkt announced the completion of the first round of financing of US$182.5 million. The investors came from 12 investment partners including Microsoft’s venture capital department M12, ICE, Boston Consulting Group, Naspers, and Horizons Ventures. Starbucks did not actually Participated in Bakkt's first round of financing.
However, the news of Starbucks' cooperation with Bakkt has sparked public speculation that Starbucks may support encrypted payments (that is, the purchase of food and beverages directly through encrypted currencies), and it has been misrepresented for a while before it was clarified by Starbucks. According to a report from the block three weeks ago, Starbucks will cooperate with Bakkt to support Bitcoin payments by integrating Bakkt's software into Starbucks' in-store payment scenarios. In fact, the so-called implementation of Bitcoin payment requires the installation of Bakkt's payment system at the Starbucks terminal to convert encrypted assets into US dollars before making payment, instead of directly using cryptocurrency to consume in Starbucks.
Through this cooperation, Starbucks replaced part of Bakkt’s equity as a way of equity reduction. The specific equity amount is still kept secret. People familiar with the matter told The Block that Bakkt is valued at about $740 million after the Series A round of funding. Compared with the US$182.5 million raised last year, The Block believes that the current post-money valuation of US$740 million means that ICE may have sold as much as 25% of its shares to outside investors, such as Galaxy, Pantera, Microsoft and Starbucks.
From the perspective of market evaluation, the cooperation between Microsoft, Starbucks and Bakkt is regarded as a major initiative that can change the payment method of consumers and strengthen the circulation of Bitcoin. Judging from the actual cooperation situation at this stage, the topicality and popularity are greater than the reality The value of cooperation, but at the moment when the application scenario of Bitcoin has not yet made a breakthrough, it can be regarded as an imaginary space that can promote the circulation of cryptocurrency to a certain extent.
Compared with the two well-known shareholders of Microsoft and Starbucks, Bakkt's real confidence mainly comes from ICE. Intercontinental Exchange (ICE), as the parent company of the New York Stock Exchange, is the second largest financial exchange owner in the world, second only to CME in terms of revenue. ICE operates a total of 12 exchanges in the United States, Europe, Asia, and Canada. Served by 6 clearinghouses vertically integrated with ICE Futures US and other exchanges.
From the introduction on Bakkt's official website, Bakkt's mission is to build the first comprehensive, institutional-level trading market and custody solution for the physical delivery of digital assets. To build such a full-featured trading platform from trading to clearing, custody savings, Bakkt compared to ErisX and CoinFLEX's physically delivered Bitcoin futures, ICE's global connections with the largest traders in all asset classes, And its own mature transaction infrastructure can provide Bakkt with the required security guarantee and strong resource support. Bakkt Chief Operating Officer Kelly Loefle mentioned when talking about the main advantages of Bakkt and ICE that what many people don’t realize is that most regulation relies on partnerships.
Going back to Bitcoin futures, if Bakkt’s Bitcoin futures can be successfully launched, it means that a more mature digital asset investment platform and infrastructure will be established for those institutional investors who have not yet fully entered the market, which will also open a far-reaching future. The current investment scale of retail investors and venture funds.
