Bakkt, a subsidiary of Intercontinental Exchange, is building an open, seamless global network to enable you to buy, sell, store and spend digital assets simply, safely and efficiently.
Bakkt: About the Platform
Bakkt’s solution is meant to be an open-source, neutral platform designed to meet regulatory requirements.
This will open the blockchain space to investors who require a secure platform and are not comfortable with non-custodial solutions.
Custodian service is an establishment that guarantees to securely hold someone else’s assets.
In the cryptocurrency space, custody gets complicated as the blockchain technology is still nascent: Even when applying extreme measures there is still chance that a vulnerability might appear leaving an asset irretrievably lost if not handled well.
That is why businesses with expertise in finance rather than in emerging technology prefer to use third party solutions for cryptoasset storage and custody.
However, the unclear regulatory standards make it difficult for anyone to actually offer this type of services.
Bakkt can effectively create a stepping stone for other businesses that want to come up with crypto custody solutions, warehousing or safeguarding of cryptoassets.
For now, Bakkt is only planning to work with Bitcoin.
- We are monitoring the business of cryptoasset custody here
Bakkt will act as a business crypto custody supporting regulated institutions in the blockchain industry. This solution will be more cost-effective than business custody products presently available and will also make trading and spending of the cryptoasset possible.
The difference between having exposure via Bakkt and trading a Bitcoin futures product (such as CBOE) is that positions via Bakkt are pre-funded: Bakkt purchases Bitcoin first and then it will offer its customers direct exposure via the funds it holds.
This proposition is expected to support innovation in blockchain applications development and make digital asset markets more liquid.
In coordination with Bakkt, ICE Futures US and ICE Clear US plans to launch physically delivered bitcoin futures, once approved by regulatory organizations.
The Business Intelligence for Bakkt
Bakkt is a subsidiary of Intercontinental Exchange with headquarters in Atlanta, USA at 5660 New Northside Dr NW.
At first, Bakkt is planning to address requirements of regulated institutions and their clients and stakeholders.
Bakkt is certainly not the first ever initiative with the goal to make cryptoassets more liquid and accessible.
The CEO Kelly Loeffler mentions the following points as competitive advantage of Bakkt:
- Leveraging already established infrastructure of regulated futures markets: Institutional-grade on-boarding and compliance will be included in the process of physical delivery and custody of BTC.
- Bakkt’s futures contracts will be physically delivered in BTC, not in a fiat currency.
- State of art security: Safeguarding of crypto assets is an emerging industry. Bakkt claims to be using methods like biometric scans, sharding and multi-sig.
- Bakkt will rely on different participation agreements than OTC markets, other than that it is also subject to different standards of regulatory oversight and reporting.
For cryptocurrency traders, it is worth expanding on the last point:
Bakkt will be working against the fragmentation of markets and information we see on the cryptocurrency markets. For instance, OTC makes a major part of today’s bitcoin transaction volume but there is no information about it available other than for the parties directly involved in each transaction. Bakkt on the other hand will actively contribute to the price discovery process on cryptocurrency markets.
Standards of the procedures necessary to implement these points are subject to final review and approval by the US CFTC.
The Bakkt project itself was started by finance industry heavyweights - ICE, Bakkt’s parent company, is the owner of the New York Stock Exchange (NYSE) and therefore has an established business relationship with banks like JP Morgan.
The project leverages several high-profile partnerships:
- Bakkt is backed by Intercontinental Exchange’s already established financial market infrastructure and technology.
- Microsoft is contributing to Bakkt through their cloud computing platform Azure.
- Starbucks will be the Bakkt’s flagship retailer.
- Bakkt will also be launched in partnership with Boston Consulting Group.
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