On Tuesday (18 September 2018), Kelly Loeffler, the CEO of Bakkt, the new “global platform and ecosystem for digital assets” announced on 3 August 2018 by Intercontinental Exchange (the parent company of New York Stock Exchange) explained in a blog post how Bakkt was planning to achieve its goal of making digital assets “more liquid, trusted and accessible.”
Loeffler starts by acknowledging that Bakkt is not the only company in the crypto space working toward this goal. So, she outlines the two key areas in which Bakkt’s approach is different:
First, instead of launching new products on new infrastructure, which is a complex process that can take a lot of time (which means slow adoption), they decided that Bakkt’s foundation would use “the existing, time-tested, regulated futures market infrastructure to introduce physically delivered Bitcoin and warehousing to global markets.” This means that, for the first time, features of the existing futures market, such as “institutional-grade onboarding and compliance” (e.g. market surveillance, following AML rules, and federal-level reporting), would be part of the “physical delivery and warehousing of Bitcoin.”
Bakkt’s first futures product will be “physically-delivered” futures contracts (with prices quoted in USD, GBP, and EUR).
Second, the connectivity and participation needs of institutional investors is different from those of retail investors on unregulated spot exchanges (such as Coinbase). Examples of features expected by the former are Financial Information Exchange (FIX) API access and consolidated ticker feeds. Bakkt’s CFTC-regulated physical delivery market price “is designed to offer more information in real-time and greater transaction efficiency.”
Finally, Loeffler points out that although there are many interesting developments that will be announced in future, Bakkt’s primary initial focus will be “supporting regulated institutions in serving customers in this emerging asset class.”
According to Intercontinental Exchange (ICE), Bakkt’s one-day physically-delivered Bitcoin futures contracts will be issued by ICE Futures U.S., and cleared by ICE Clear U.S. “These contracts will be traded on ICE’s electronic trading platform, which offers industry-leading speed and reliability, regulated by the CFTC. All trades are cleared and guaranteed by ICE Clearing US, the central counterparty for all ICE cleared forex futures trades. Trades will result in physically delivered Bitcoin in ICE’s regulated Digital Asset Warehouse.”
Subject to approval of the U.S. Commodity Futures Trading Commission (CFTC), ICE is planning to launch the Bakkt platform in November 2018.
Featured Image Courtesy of Bakkt