On August 16th 2019, Bakkt announced their receipt of regulatory approval to launch bitcoin futures and custody services. The move, they say, is designed to transition the digital asset space from retail to institutional investors.
Bakkt’s Launch of Bitcoin Futures Explained
Bakkt’s bitcoin futures contracts have been in development for quite some time.
Bakkt— a subsidiary of the Intercontinental Exchange (ICE), which owns the New York Stock Exchange (NYSE)— is now set to offer daily and monthly bitcoin futures contracts.
The futures will be physically delivered, which has seemingly become a bit of a regulatory hurdle. While Bakkt previously received a green light from the CFTC, it has now received approval by the New York State Department of Financial Services to create a qualified custodian, the Bakkt Trust Company.
In April of this year, Bakkt
acquired the Digital Asset Custody Company (DACC). The move was likely part
of Bakkt’s preparation in becoming a qualified custodian.
Per the announcement, the custody and physically-delivered
daily and monthly bitcoin futures contracts will be available September 23rd.
The Bakkt Warehouse, which is part of Bakkt Trust Company,
was built with “cyber and physical security protections that support the world’s
most actively traded markets, including the NYSE”. It features the secure
custody of bitcoin, protected by $125 million in insurance.
Bakkt CEO Kelly Loeffler wrote,
“Bakkt’s bitcoin futures will be exchange-traded on ICE Futures U.S. and cleared on ICE Clear US, which are federally regulated by the CFTC.”
How Bakkt Plans to Attract Institutional Investors
Loeffler continued to outline the primary mission in Bakkt’s development: to attract institutional investors to the digital asset realm. She says,
“…digital asset markets are global and well-developed, but they have largely been designed to serve retail customers rather than institutional participants. Bakkt is bridging that gap to access this market and solve for factors that have slowed institutional participation.”
A key part of such a mission is regulatory compliance. While Bakkt’s road featured numerous delays, the security and peace of mind that comes with regulatory compliance also comes with a cost. In Bakkt’s case, that cost was time.
But now, Bakkt has the regulatory approval to move toward a trusted ecosystem— a critical factor for institutional investors. According to Loeffler,
“Providing a trusted ecosystem is our first objective. To do that we are setting a higher standard, including an institutional compliance and anti-money laundering program, settlement prices that are distinct from unregulated spot prices, comprehensive market oversight, a guaranty fund contribution and insurance. The trading and risk management tools that make all of this possible have been centuries in the making.”
What do you think about Bakkt launching in September
2019? Will Bakkt go on to bring institutional investors into the digital asset
space? Let us know what you think in the comments section below.
Image courtesy of Bakkt.