Intercontinental Exchange’s (ICE) plans to launch bitcoin futures have been scuppered – again – by US regulators.
The exchange operator originally planned to launch the new products in November of last year.
But the Commodity Futures Trading Commission (CFTC) has refused to give its approval to the new service.
Bakkt – ICE’s name for the project – ran afoul of the regulator over its plans to store customers’ bitcoins.
According to the Wall Street Journal, the CFTC told ICE in February that its custodial plans would require public disclosure of its business plan and a public comment period.
It appears that ICE has not agreed to those terms and that the dispute between the exchange and the regulator is continuing.
At the crux of that dispute is the fact that cryptocurrencies are effectively a new asset class.
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Thus, regulators are unsure as to how they should be treated and have, in many cases, simply transplanted old regulations on to a new product.
Collateral regulations in the world of bitcoin
In prior announcements, ICE has said that it would settle bitcoin futures transactions on a daily basis.
That would mean that firms trading in those futures would, depending on whether they had gained or lost money, accept bitcoin from Bakkt or deposit the cryptocurrency into the exchange’s digital vault.
Alongside these custodial problems is the matter of collateral. When trading in futures, firms will typically put down collateral in fiat currency.
But in the case of Bakkt’s bitcoin futures, though the principle of putting down money is the same, collateral could be paid in cryptocurrency.
That raises problems for the CFTC as the regulator is yet to have dealt with such a situation before.
How the regulator and exchange operator will eventually resolve their differences remains unclear. In the meantime, the cryptocurrency bear market continues unabated.