Bakkt, an upcoming cryptocurrency exchange backed by the Intercontinental Exchange (ICE), owner of the New York Stock Exchange (NYSE), will offer a physically settled Bitcoin futures contract, subject to regulatory review and approval. The new offering will provide greater access for institutional investors via a regulated market infrastructure.
Bitcoin Futures to Begin Trading on Dec. 12
According to a press release, Bitcoin futures will be available for trading on Dec. 12, the same day as Bakkt’s launch. The contract will be traded on ICE’s electronic trading platform, which is regulated by the US Commodity Futures Trading Commission (CFTC). The contract will also be held in ICE’s Digital Asset Warehouse and will be cleared, validated, and guaranteed by ICE Clear US, the central counterparty for all ICE-cleared forex future trades.
As for the contract, the ICE-issued document stated:
“Each futures contract calls for delivery of one bitcoin held in the Bakkt Digital Asset Warehouse, and will trade in U.S. dollar terms. One daily contract will be listed for trading each Exchange Business Day.”
Bakkt: Bringing Digital Assets to the Mainstream Market
Unlike existing cryptocurrency exchanges, Bakkt is a global platform and ecosystem that will include federally regulated markets and warehousing. By leveraging a trusted market infrastructure, Bakkt’s goal is to develop an open and regulated environment for digital asset market and help cryptocurrencies evolve securely and efficiently in a safe manner.
The platform has become a very attractive offering for institutional investors since it is trading on federally regulated exchanges and also has clearing and custody services from a major service provider. As seen from Bakkt CEO Kelly Loeffler’s Medium post, the upcoming cryptocurrency exchange is finding all opportunities to mitigate risk while providing opportunities for institutional investors to serve their clients in a regulated manner.
Bakkt was a partnership venture between ICE and a number of companies such as Starbucks and Microsoft. Bakkt will leverage Microsoft’s cloud solutions and work with many organizations to create an open platform where consumers and institutions can purchase, sell, store, and spend their cryptocurrencies on one global network.
Jeffrey C. Sprecher, founder, chairman, and CEO of Intercontinental Exchange, believes that bringing trusted infrastructure and connecting them on a global network will result in greater confidence in the emerging asset class.
Former Coinbase Executive Joins Bakkt
As Bakkt prepares for its launch in Dec. 2018, Fortune mentioned on Oct. 15 that Adam White, the fifth employee at Coinbase, has recently become the chief operating officer at Bakkt. White noted a significant shift in 2017, when interest in the cryptocurrency industry began to change from retail to institutional investors. Although the infrastructure of existing cryptocurrency exchanges failed to meet the expectations of large institutions, he is confident that institutional investors will join the industry once the infrastructure is secure and is similar to that enjoyed by them when trading other assets such as equities, bonds, or gold.
Although the total market valuation of the cryptocurrency industry has fallen 70 percent, White believes that short-term prices are a poor metric to measure the industry’s growth. He encourages investors to look at the long-term trajectory of the market and analyze the fundamentals, trading volume, and overall progress and development of the technology.
Can Bakkt Change the Viewpoint of the SEC?
Bakkt’s entrance into the cryptocurrency industry in Dec. 2018 may, however, make a more substantial impact than anticipated. While it may open doors for institutional investment, it may also influence the Security and Exchange Commission’s (SEC’s) stance on cryptocurrencies.
As Joseph Young, a well-known cryptocurrency analyst, pointed out on Twitter, the US SEC has rejected nine Bitcoin ETFs that based their price on the futures market. SEC was concerned that the Bbitcoin futures market lacked liquidity, had limited investor protective measures, and lacked antimoney laundering procedures. Bakkt’s entrance into the cryptocurrency sector could, however, bring greater liquidity, legitimacy, and credibility into the industry.
Regardless of whether Bakkt can sway SEC’s decision on Bitcoin ETFs, the exchange’s arrival into the cryptocurrency sector will help strengthen and boost the industry and the emerging asset class.
