Bakkt Sets Its Sights on Europe Following MiCA Implementation

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Dan O’Prey, Chief Product Officer at Bakkt, recently discussed these positive developments and shed light on the company’s plans for retail expansion during an interview with Cointelegraph’s U.S. News Editor, Sam Bourgi, at the Bitcoin 2023 event.

Bakkt’s Dan O’Prey Highlights Positive Trends in Global Cryptocurrency Regulation

In a conversation with Sam Bourgi, Dan O’Prey discussed the positive long-term trends in the global regulatory landscape for cryptocurrency. He also mentioned the company’s plans for expanding its retail operations overseas.

Over the past two years, Bakkt has prioritized its role as a “B2B2C” firm, witnessing a significant level of institutional interest focused on Bitcoin, despite the repercussions of the FTX cryptocurrency exchange collapse.

O’Prey emphasized that Bitcoin’s reputation has suffered due to issues and controversies surrounding other companies, practices, and cryptocurrencies within the industry, even though those were unrelated to Bitcoin itself.

While Bitcoin has benefited from the regulatory ambiguity in the United States, which established its status as a commodity, the lack of regulatory clarity for cryptocurrencies in general remains a significant hurdle for broader Bitcoin adoption.

O’Prey acknowledged this challenge and noted that the recent events have underscored the importance of implementing robust practices in the industry, despite the slower pace of progress in doing so.

Bakkt currently operates its retail platform exclusively within the United States, focusing on embedded trading, payouts, and rewards. However, the company has ambitious plans to expand its retail activities internationally. O’Prey explained that Bakkt is collaborating with its partners to identify jurisdictions where they already engage in equities trading or are interested in adding cryptocurrency services.

O’Prey commended the European Union’s recent introduction of the Markets in Crypto-Assets regulations, highlighting the value of regulatory clarity.

He emphasized that such clarity enables individuals and businesses to understand the operational and compliance requirements, ultimately fostering increased participation from institutions and attracting talent, capital, and job opportunities to regions that embrace crypto-friendly regulations.

The interview shed light on the positive trajectory of cryptocurrency regulation globally, Bakkt’s strategic focus on institutional and retail markets, and the company’s aspirations to expand its retail presence beyond the United States.

Bakkt’s Acquisition of Apex Crypto Boosts Profitability Prospects

Bakkt reported a net loss of approximately $45 million in the first quarter. However, the company anticipates that its recent acquisition of Apex Crypto will contribute to its future profitability.

The acquisition, which was completed on April 1, is aimed at integrating Apex Crypto’s business swiftly. During a webinar, Bakkt CEO Gavin Michael emphasized that the deal will accelerate the introduction of new crypto capabilities, strengthen the company’s path to profitability, and provide access to highly skilled employees in product engineering and operations.

Karen Alexander, Bakkt’s Chief Financial Officer, attributed the lower-than-expected net revenue of $13 million in the first quarter to volume-based service revenue. She highlighted the impact of activity levels at the customer call center and ongoing technology development work conducted on behalf of clients.

Alexander expressed optimism regarding the contribution of Apex Crypto’s financial results for the remainder of 2023, expecting them to bring Bakkt closer to achieving free cash flow breakeven in combination with the company’s overall performance. The acquisition of Apex Crypto was agreed upon in November, and it allows Bakkt to expand its crypto offerings to corporate clients.

Bakkt’s association with Apex Crypto has facilitated partnerships with leading platforms such as Webull, Stash, and Public.com. This shift in focus has seen Bakkt prioritize delivering crypto capabilities to its partners rather than directly targeting end consumers.

By operating behind the scenes, Bakkt aims to create an optimal trading experience for clients, replicating a model that has proven successful.

International Markets and Crypto Custody Take Center Stage

In line with its regular coin listing review process, Bakkt recently made the decision to delist at least 25 coins. This move was primarily driven by the rapidly evolving regulatory landscape in the United States, with the Securities and Exchange Commission’s enforcement action against Bittrex serving as a significant factor.

While delisting 25 coins may appear substantial, Bakkt generates the majority of its revenue from coins with larger market capitalization, such as Bitcoin.

Despite the regulatory uncertainties, Bakkt remains committed to offering a range of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, Cardano, Solana, Bitcoin Cash, Dogecoin, Ethereum Classic, Polygon, Shiba Inu, and USD Coin.

Looking ahead, Bakkt intends to expand its presence in additional markets, including the United Kingdom, parts of the European Union, and Southeast Asia. The CEO, Gavin Michael, highlighted the progress being made in these regions in terms of crypto legislation and the existing presence of Bakkt’s clients, which would facilitate market entry.

Crypto custody serves as a cornerstone product for Bakkt, and the company places great importance on enhancing its custody offering. Bakkt’s custody service benefits from $125 million of insurance coverage, providing clients with an added layer of protection. The company plans to bolster its architecture to better serve partners and institutional clients.

This includes implementing automated hot wallets to enable seamless deposits and withdrawals for consumers, as well as introducing yield-generating options like staking. Bakkt remains optimistic about the future growth of its custody business and expects it to gain momentum as the year progresses.

Bakkt’s acquisition of Apex Crypto sets the stage for improved profitability prospects, while delistings and international expansion reflect the company’s strategic response to the evolving regulatory environment. Bakkt also aims to strengthen its crypto custody offering, enhancing its capabilities and seeking to meet the evolving needs of its partners and institutional clients.

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