Crypto winter has been a boon for highly-anticipated bitcoin futures exchange Bakkt, an executive from its parent firm said Thursday.
Jeffrey Sprecher, CEO of Intercontinental Exchange (ICE), said during the company’s Q1 earnings call that the ongoing bear market has been “helpful” for Bakkt, which was initially scheduled to launch last December, then delayed to January, then again indefinitely.
“It’s really been helpful that the cryptocurrency [market] went into what they call a winter, [because] it took some of the heat off the timetable to launch,” Sprecher said, adding that this was just one benefit.
Another benefit is that many crypto startups’ valuations have declined, creating buying opportunities for Bakkt, he said, explaining:
“We’ve actually been looking at a number of different companies and acquired a company earlier this week that wouldn’t have been available to us if the market was really hot, because the valuations were really hot.”
Indeed, on Monday Bakkt announced it had acquired Digital Asset Custody Company (DACC), which is developing a crypto-asset storage platform. (The price was not disclosed.)
That being said, the industry is continuing to mature, and Bakkt is working to help it do so, Sprecher said. The company has brought on a number of engineers through its recent acquisitions (Bakkt has also acquired some assets, including personnel, from Rosenthal Collins Group, an independent futures commission merchant).
“There’s a lot of interest still in this market,” he said.
Regulatory questions
One of the primary causes for Bakkt’s delays are regulatory in nature – specifically, it is widely believed that the firm’s plan to custody bitcoin itself under federal supervision and settle contracts through its parent firm’s clearinghouse have placed it in a regulatory gray area.
While Sprecher did not specifically address what the holdups were, he did note that regulators are still trying to understand the asset class and how to regulate it.
“You can’t really get into the true institutional markets that we serve without being highly regulated and highly trusted so the juice is worth the squeeze,” he said, adding:
“It’s going well now, there were a lot of things that had to get sorted out with jurisdiction and custody and … banks and those issues that in my mind need to be resolved before adoption of the asset class and we’ve been at the forefront of [this].”
The bear market has helped in this sense as well, by giving both regulators and legislators in the U.S. some additional time to determine how they might eventually regulate this space, Sprecher said.
Sprecher did not address how much ICE has spent on Bakkt to date, though Scott Hill, chief financial officer at ICE, previously said that the firm planned to invest between $20 and $25 million in 2019. This figure comes on top of $182 million Bakkt raised from investors.
Jeffrey Sprecher image via CoinDesk archives