This article comes fromThe Block, by Aislinn Keely, Frank Chaparro, and Isabel Woodford
Odaily Translator |
Odaily Translator |
According to The Blockslideshowslideshow, the Bakkt project backed by the Intercontinental Exchange (ICE), is still awaiting approval from the New York Department of Financial Services (NYDFS) to operate its Bakkt Warehouse, which would allow Bakkt to operate as a limited-purpose trust company. (Odaily note:limited purpose trust company
A trust company chartered by a state government to perform certain trust functions, which may include acting as a depositor or custodian of securities or mortgages. )
If approved, Bakkt Warehouse will become a qualified custodian for bitcoin, providing support for physical futures delivery of bitcoin.
"The product depends on Warehouse," a trading executive who requested anonymity told The Block in a message.
In May, Bakkt said it would not launch daily contracts and monthly contracts until it obtained trust status.
“Bakkt’s infrastructure creates the first end-to-end regulated environment for traders to deliver and receive bitcoin in exchange for U.S. dollars in a standardized settlement cycle,” the filing reads.
Product Plans Under Review
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An early launch would be good news for clients in other states, but multiple industry sources who have seen Bakkt’s financing presentation said some of its launch plans took too much risk.
First, they point out that Bakkt’s guarantee fund (or margin) may be too small to cover risky positions. ICE will contribute $35 million to Bakkt's existing guarantee fund, earmarked to cover losses related to bitcoin contracts. Guarantee funds are usually required and administered by state governments as a safeguard against insurers being unable to pay policyholders.
"This is not a normal practice in the liquidation risk management system," said Ricky Li, co-founder of trading firm Altnoy.
He took issue with the size of Bakkt's fund, which would have about $400 million in open positions at risk compared with a $35 million guarantee fund. Bakkt itself appears to acknowledge the risk of inflation, with ICE material explaining plans to increase the guarantee fund over time after launch.
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