Bakkt Says Latest Acquisition Will Help Its ‘Consumer Business’

On Monday (January 14th), Kelly Loeffler, the Chief Executive Officer (CEO) of Bakkt, a subsidiary of the Intercontinental Exchange (ICE), announced that Bakkt had acquired "certain assets of Rosenthal Collins Group (RCG), an independent futures commission merchant," a move that it hopes will "aid" its "consumer business."

Here is how Bakkt announced the news on Twitter:

In a post published on Bakkt's Medium blog a short time ago, the Bakkt CEO started by listing Bakkt's objectives:

"As those who’ve followed us since our first announcement in August know, our mission is to build the first integrated, institutional grade exchange-traded markets and custody solution for physical delivery of digital assets... In parallel, we’re building a secure, scalable platform for transacting with digital assets so that our regulated ecosystem serves consumers, merchants and institutions."

She then explained that while Bakkt is waiting for "regulatory approval by the CFTC" for Bakkt's physically-settled Bitcoin (BTC) futures contract, Bakkt had decided to acquire "certain assets" of RCG (including some of its employees), a transaction that Bakkt expects to close in February.

What is the point of this acquisition?

Loeffler explains:

"First, it will enhance our risk management and treasury operations with systems and expertise. Other aspects of the transaction will contribute to our regulatory, AML/KYC and customer service operations as we help enable digital asset acceptance by bringing more choice and control to buyers and sellers."

A report in Fortune, which interviewed the Bakkt CEO, says that this acquisition "confirms that the cryptocurrency trading company is speeding its plans to revolutionize the way people pay for everything from coffee to cars." 

Loeffler told Fortune:

“Typically when companies are combined you have overlapping systems, so we saw an opportunity to a purchase a portion of the back office operations, including compliance and treasury services, and risk management, as well as adding members of the RCG team.”

Fortune says that although "Rosenthal traditionally focused on the institutional side," Loeffler "emphasizes that Bakkt will use its expertise in an entirely new area to support its vision for streamlining payments between customers and merchants."  Loeffler is quoted as saying:

“It’s not so institutions can trade. The acquisition will aid our consumer business as we build Bakkt.”

The Bakkt CEO also told Fortune:

"The evolution of blockchain technology opens new possibilities for digital assets to serve as an an efficient payments mechanism at the consumer and merchant level."

"Think about today’s Starbucks app. You can pre-fund a prepaid or stored value card with a digital app. The first use case is to pre-fund the cards, with Bitcoin. The goal is to give consumers the choice between purchasing with digital or fiat currency.”

On 31 December 2018, Bakkt announced that in its first round of fundraising, had received $182.5 million from several partners and investors who also "believe in the future of digital assets."

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Fed Rate Cuts Will Likely Boost Bitcoin Says Deutsche Bank

Neil Dennis

The central banks of some of the world's largest economies are about to embark on interest rates cuts and this is likely to play into the hands of Bitcoin investors, says Deutsche Bank's Jim Reid.

Global growth is slowing, a result of falling business confidence as trade tensions around the world increase - led by the seemingly intractable tariff feud between the US and China.

Under Pressure to Cut

While these effects are starting to be felt around the world, the caretakers of the most powerful economy on earth - under severe politicial pressure from President Trump - are already looking towards monetary policy measures that will support growth.

The Federal Reserve has already turned dovish, and even though it left interest rates on hold at 2.25-2.5% at its May and June meetings, comment from Fed officials this week has left the impression a rate cut could soon be on the way.

In a speech on Tuesday, Fed Chairman Jerome Powell said:

The cross-currents have re-emerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy.

A further hint that the Fed was moving towards a quarter point rate cut at its July meeting was Powell's assurance on Tuesday that "an ounce of prevention is worth more than pound of cure".

Dollar Weakening

Insofar as rate cuts and other monetary easing policies from the Fed undermine the US dollar, such policy dovishness can be seen as supportive for Bitcoin's price versus the US currency (BTC/USD).

Jim Reid, multi-asset research strategist at Deutsche Bank said on CNBC on Wednesday that he thought the recent move in Bitcoin was emblematic of the current weakness in the dollar:

If the major central banks are going to be this aggressive then alternative currencies start to look more attractive.

Cryptocompetitor

Reid has been a long-time advocate of alternative currencies. He said back in November 2017, just before the massive Bitcoin rally that took the BTC price close to $20,000 that the use of virtual currencies should be promoted around the world as people lose faith in central banks' ability to control fiat currency.

He said:

Although the current speculative interest in cryptocurrencies is more to do with blockchain technology than a loss of faith in paper money, at some point there will likely be some median of exchange that becomes more universal and a competitor of paper money.