Bakkt CEO: ‘With Our Solution, the Buying and Selling of Bitcoin Is Fully Collateralized or Pre-Funded’

Siamak Masnavi

On Monday (20 August 2018), Bakkt, the new company announced by Intercontinental Exchange (ICE) on 3 August 2018, declared that with its solution, "the buying and selling of bitcoin is fully collateralized or pre-funded."

ICE's press release mentioned that Bakkt would be offering a one-day phsyically-delivered Bitcoin futures product:

"As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies."

This is how Bakkt announced today's news on Twitter:

Kelly Loeffler, the CEO of Bakkt, provided more details in a post on Bakkt's Medium blog.

Loeffler started by saying that to achieve a "trusted infrastructure for trading, storing and spending digital currencies", Bakkt would need to provide:

  • "a consistent regulatory construct";
  • "transparent, efficient price discovery"; and
  • "an institutional quality pre- and post-trade infrastructure"

She then moved to the "meat" of Bakkt's announcement:

"A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset."

She noted that this provided support for market integrity and differentiated them from other exchanges which "allow for margin, leverage and cash settlement." She went on to say that once you take into account the fact that Bakkt also provides "a secure, regulated warehouse solution", it was easy to see how this infrastructure could "help more institutions and consumers participate in the asset class."

For many crypto traders/investors and analysts, what Bakkt announced today sounded great. However, not everyone was equally excited.

Caitlin Long, 22-year Wall Street veteran (including over eight years at U.S. investment bank Morgan Stanley) who has been active in Bitcoin since 2012, expressed her concern about "financialization" (i.e. when an asset class becomes investable by large institutional investors) of cryptocurrencies, and especially her worries about “leverage-based financialization" (which arises "either from the issuance of more assets out of thin air to dilute existing holders, or from the creation of more claims to the asset than there are assets") in an article for Forbes published on 31 July 2018.

Then, on 7 August 2017, a few days after ICE's announcement about Bakkt, she wrote another interesting article for Forbes Titled "Racing to Fix Wall Street: ICE, Cryptocurrencies And Enterprise Blockchain" that explained how ICE's move into the crypto space was "a double-edged sword". More specifically, she warned us about the possibility of seeing "fractionally-reserved bitcoin", i.e. more "paper claims to bitcoin (created off-chain) than there are real bitcoins on-chain" (with the danger being that that these paper claims would "offset bitcoin's natural scarcity to some degree, thereby suppressing bitcoin's price").

Upon hearing Bakkt's announcement earlier today, Long sent out the following tweets to explain that although the confirmation that Bakkt's daily Bitcoin contract would not be traded on margin, use leverage, or serve to create a paper claim on a real asset" was a good thing, she still had a few reservations:


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Gmail Competitor FastMail to Stop Accepting Cryptocurrency Payments

Francisco Memoria

FastMail, a Gmail competitor focusing on speed and efficiency, has recently warned its users that it’s going to stop accepting cryptocurrency payments at the end of March, as the costs it was enduring to accept bitcoin and bitcoin cash payments became “unsustainable.”

According to a Reddit thread created by a user who received FastMail’s notice, the company has noted that only a small number of its users were paying for the service with cryptocurrencies. The notice reads:

Bitcoin is used by only a small number of customers, which unfortunately makes the integration costs of maintaining Bitcoin support unsustainable. You can still pay with Bitcoin through March 31, 2019. Add funds to your account now to be used for future renewals.

Going forward, the email service provider is going to accept traditional payment methods only, include Visa, MasterCard, PayPal, and American Express. Reacting to the news some users noted there are other options accepting cryptocurrency payments out there, while others lamented the development.

Back in 2016, FastMail made headlines after it quietly started accepting cryptocurrency payments. The company started accepting them through cryptocurrency payment provider BitPay, which some are blaming for the recent development, over the costs FastMail claims to have.

While FastMail is set to stop accepting cryptocurrency payments, crypto adoption has seemingly been growing. Earlier this year, a giant Danish online food portal started accepting BTC payments, as well as premium airline Surfair for a fundraising campaign.