Bakkt CEO Gavin Michael reflects on recent events in crypto
There is no doubt that the news over the past few weeks has been shocking to us all and it is disheartening to see such risky and inappropriate practices come to light. It will take some time to learn exactly what transpired and how many consumers and market providers are impacted. As we have seen with previous events, it can take an extended period of time to see the full impact of a situation like this. It’s extremely disappointing to see what appears to be a breach of trust and lack of transparency.
Bakkt has no exposure to FTX, FTT, or Alameda. Consumers on the Bakkt platform continue to have access to their bitcoin and ether and can buy or sell. Institutional withdrawals continue to be fully operational.
We have always taken a mature and thoughtful approach to risk; we do not lend or rehypothecate our customers’ crypto. We also separate custody and trade execution functions to provide additional customer protection and minimize any potential for conflicts of interest. Our customers’ crypto remains our customers’ crypto and are custodied in a separate New York Department of Financial Services (NYDFS) regulated trust entity. We do not use these assets for any other purpose and operate with a one to one full reserve. We believe these are prudent and necessary measures to ensure we are operating in the best interests of our partners and their customers at all times.
Bakkt is regulated by the NYDFS for both our Trust and BitLicense, is a registered money services business with FINCEN, and holds money transmitter licenses where required in all U.S. states in which we operate. We have built strong compliance measures, controls, and rigorous risk management practices. As a public company, Bakkt has opted to be regulated in the most comprehensive way available for a company in this space. To date, there is no comprehensive federal regulatory scheme for digital asset companies, but if that time comes, we are ready.
We believe that while part of Bitcoin’s and crypto’s attraction is its decentralized nature, greater regulatory clarity will help the market mature and grow.
The crypto market is learning many of the painful lessons learned in other markets previously – just because these assets are on a blockchain does not make them immune to counterparty risk, contagion or challenges with centralized market structures. While seeing this play out is unfortunate, the removal of exuberant and speculative business models, crypto tokens and business practices will lead to a crypto ecosystem that is more sustainable and transparent.
These latest developments only strengthen our belief that there is an important role for Bakkt® – an experienced, regulated player that enables crypto access in a thoughtful and responsible way.