Bakkt is led by Kelly Loeffler as CEO, and her husband is the chairman and CEO of the Intercontinental Exchange (ICE) which owns the New York Stock Exchange (NYSE) as well as several other major global marketplaces.
Building a Regulated Futures Market For Bitcoin
Bakkt is supported by ICE and partnered with both Microsoft and Starbucks as part of an initiative to serve as a scalable on-ramp for Bitcoin institutional, merchant, and consumer participation in digital assets.
Bakkt plans to use existing regulated infrastructure in the futures market to introduce physically-delivered Bitcoin futures contracts and warehousing to global markets. Eventually, Bakkt hopes to provide a complete set of institutional-grade onboarding and regulatory compliance to allow Bitcoin to be offered in everything from mutual funds to ETFs.
Bakkt’s first contracts will be one-day, physically-delivered Bitcoin futures contracts versus fiat currencies. Using the ICE Futures U.S. market and ICE’s clearinghouse infrastructure, Bitcoin future contracts will actually deliver the underlying asset (Bitcoin) to buyers through federally regulated customer accounts within Bakkt’s licensed infrastructure of secure and fully compliant warehousing.
This differs from current Bitcoin futures contracts available with the CME where counterparties are betting on price fluctuations without any actual exposure to the underlying asset Bitcoin. Secure custody through full warehousing services — that mirrors commodities such as gold and silver — is a significant hurdle for many institutional investors in entering the digital asset space.
Microsoft and Starbucks’ involvement in the venture reveals even larger plans for Bakkt who has been relatively quiet about the second phase of their rollout following the launch of physically delivered Bitcoin futures contracts. Starbucks is already one of the leaders in promoting point-of-sale payments through phones rather than debit/credit cards. Further, Microsoft’s Azure Cloud business serves an enormous amount of retailers, signaling the potential role of Bakkt in developing Bitcoin conversion services and practical payment applications with e-commerce and consumer payment rails.
Polarizing Methods to Bitcoin Adoption
Bakkt’s planned launch of a fully regulated futures marketplace for Bitcoin on existing futures infrastructure opens the door for institutional investors and retail investors to gain exposure to Bitcoin through mutual funds, pensions, ETFs, and more. Secure and compliant warehousing services along with a network of established ICE clearinghouses backing the futures contracts will assuredly provide comfort for many investors hesitant to touch Bitcoin and other digital assets.
Conversely, speculation of bringing Bitcoin to the mainstream through institutional products is a polarizing topic. Secure custodial warehousing of physically delivered Bitcoin may seem great for institutions, but it runs contrary to the larger theme of removing intermediaries and trusted third parties in the cryptocurrency space.
Bitcoin ETF proposals have already been denied by the SEC several times and come with their own controversial implications. Increased exposure to Bitcoin through federally regulated marketplaces may eventually positively impact Bitcoin’s price and bring other digital assets to the mainstream. However, the emergence of P2P marketplaces and sentiment expressed from popular figures within the cryptocurrency community that Bitcoin ETFs and institutional products are a bad idea remains an intriguing trend competing with developments like Bakkt’s physically-delivered Bitcoin futures contracts.