According to information obtained by Longhash, the US government shutdown has already created problems in the world of crypto.
Bakkt, a platform for using and trading crypto owned by global financial markets company Intercontinental Exchange (ICE), has postponed its launch until the spring due to the shutdown.
The shutdown will also stymie the planned launch of a new Bitcoin Exchange Traded Fund (ETF) by fintech firm SolidX Partners.
Bakkt Launch Delayed
The Bakkt delay is due to the fact that the company requires the approval of the US’s Commodity Futures Trading Commission (CFTC). According to information obtained by Longhash, the shutdown has moved that approval date back to April.
On December 31, Bakkt CEO Kelly Loeffler wrote on Medium: “Clearing firms and customers have continued to join us as we work toward CFTC approval. We made great progress in December, and we’ll continue to onboard customers as we await the ‘green light’.”
A spokesman for Bakkt declined to comment further.
“Bakkt is an ambitious project, and as such the initial timeline offered was too optimistic,” said Hirander Misra, chairman and CEO of GMEX Group Limited, a London-based provider of global financial market solutions.
“Launching in April if it meets the deadline will still mean it has good first-mover advantage ahead of other related initiatives which could emerge in established markets.”
Zeen Zhang, Shanghai-based CEO of LOTS, a market ecosystem for digital assets, said when Bakkt does launch he expects it to increase “incremental funding” of crypto assets, especially from traditional investment funds. To those more conservative investors, Bakkt offers safe storage and the relative comfort of regulatory compliance.
But Bakkt would also be the first to offer futures contracts that pay out in cryptocurrency rather than cash. “It would greatly promote the development of crypto assets,” said Zhang.
ETF Launch Delayed
Meanwhile, the US government shutdown also means a Bitcoin ETF from SolidX Partners (a financial technology company) and Van Eck Associates (an asset manager) will not get quick approval from the US’s Securities and Exchange Commission (SEC), according to information obtained by Longhash.
The US securities regulator originally said it would decide on whether the Bitcoin ETF would be approved or not on February 27. But now, it looks like that date is likely to pass without a formal approval.
A spokesman for the SEC said the US regulator would not be able to comment on the Bitcoin ETF’s approval due to the US government shutdown.
Hopes for the launch of a Bitcoin ETF were repeatedly dashed in 2018, with rebuttals from the SEC blamed for sharp falls in cryptocurrency prices. Regulators have raised concerns over the high volatility and lack of depth in crypto markets, along with pricing and trading that would be based on platforms that lack the regulatory compliance standards of established financial markets.
“I do caution people to not live or die on when a crypto or Bitcoin ETF gets approved,” said SEC Commissioner Hester Peirce in December 2018.
Mr. Misra said he expected Bitcoin ETFs to continue to struggle to obtain regulatory approval, although he does see the upside in them. “Not only do cryptocurrency markets and associated futures contracts need to be more liquid, but additionally, institutional investors want ETFs which can give them broader exposure and diversity,” he said. “In this regard, a multi-basket cryptocurrency ETF on key liquid cryptocurrencies could prove more useful.”
Paul Smith, CEO at fintech developer MTP, said the launch of ETFs was a “useful attempt” to increase mainstream adoption of crypto products. “The crypto markets seem sensitive to external events such as the approval or not of ventures such as this,” he said.
“I am not sure that disapproval would have a negative effect, though, because confidence is already a little on the low side.”
What Bakkt Could Bring
When the Bakkt platform does launch, it could further the presence of institutional investors in cryptocurrency markets, although it will be following the previous listing of Bitcoin futures on CME Group and Cboe Global Markets in December 2017.
Futures trading provides investors with an exchange-based portal to place bets on rising and falling crypto prices. And while it’s already possible to trade Bitcoin futures, Bakkt would be the first trading platform to offer futures that actually paid out in cryptocurrency.
More futures contracts aren’t necessarily a bullish sign for short-term Bitcoin traders. The launch of futures trading on CME, the world’s biggest derivatives exchange, was shortly followed by plummeting crypto prices. Bitcoin’s value tumbled from its December 2017 record high of $19,511 by more than 20 percent in the days following the CME launch, and it dropped still further in the months after.
Still, many see the coming of more Bitcoin futures options as a good sign. Misra said as more traditional investment funds begin to see digital assets as legitimate, investment should flow into the crypto space. This year, he says, may be more focused on infrastructure and product development, with accelerating investor activity becoming more evident in 2020, and growth in 2021 becoming “more exponential.”
“This bodes well for a multitude of digital assets, with deliverable futures contracts, tokenized funds including ETCs, ETFs, and security token offerings especially benefiting,” said Misra.
Jonathan Joe Morgan, a former Bloomberg News journalist, is a Berlin-based writer.