Bakkt has been on our radar for about a year. The company wants to create a new platform that will allow investors to buy, trade and store cryptocurrency on a federally regulated market. It will start with bitcoin and eventually offer altcoins. CEO Kelly Loeffler intends for Bakkt to “serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets.”
Bakkt was originally scheduled to go live last November. But getting government clearance has proved to be more difficult and time-consuming than expected. It’s making progress though. And a week from today, Bakkt will begin testing its two futures contracts.
Unlike the CME Group’s bitcoin futures contracts, which are settled in dollars, Bakkt’s will be settled in bitcoin. Customers will receive actual bitcoins on the contract’s expiration, and not the fiat equivalent.
I told you in April that Bakkt would probably try to get a license from New York financial regulators allowing it to hold custody of customers’ tokens. The Commodity Futures Trading Commission could then greenlight Bakkt’s futures contracts through a self-certification process.
Last month, Bakkt confirmed that it will be self-certifying its futures contracts, which it said will include a daily contract and a monthly contract.
While Bakkt has not yet announced a final launch date, it’s now clear that it won’t be long before the service finally goes live.
Bakkt is offering all the things that institutional investors look for to mitigate risk and enhance safety and security. It provides a fully regulated end-to-end bitcoin (and eventually other coins) trading environment, with full KYC (know-your-customer) and AML (anti-money laundering) protocols. Its exchange will be federally regulated, so misconduct will be reported to federal authorities. And it will offer block trades; a fee holiday through the end of the year to encourage trading; market maker incentive programs to encourage liquid markets; and integrations with independent software vendors and regulated brokerage platforms.
Bakkt is also owned by the powerful ICE (Intercontinental Exchange). ICE is the owner of the New York Stock Exchange. It also owns and regulates 12 exchanges and marketplaces across the world for the commodity and financial markets.
There’s no reason why ICE’s Bakkt can’t eventually do for bitcoin futures what ICE’s Brent Crude has done for oil futures: inject trust, transparency and predictability into setting the price of a sometimes volatile commodity. ICE unleashed a huge market for oil, and we can expect Bakkt to do the same for bitcoin.
Bakkt is about to bring bitcoin (and eventually other cryptocoins) into the wheelhouse of institutional investing. As the company itself says, “This is no small step.”
Co-Founder, First Stage Investor