Bakkt To Act As a Digital Asset Clearing House In Its First Phase

Cryptocurrency exchange Bakkt tweeted that in the first phase of the project, it will work with the Intercontinental Exchange’s (ICE) markets in clearing “to deliver institutional-grade risk management, physical delivery, and warehouse solutions.” According to the company, such solutions “do not exist today.”

Bakkt emphasized that the clearinghouse risk committee of the ICE Clear US, ICE’s futures clearing house, has already approved Bakkt’s plans and that the company is approaching its new activities with a “great deal of transparency.”

"In its first phase Bakkt will work with ICE's markets in clearing to deliver institutional-grade risk management, physical delivery, and warehouse solutions that do not exist today… (1/4)

— Bakkt (@Bakkt) October 31, 2018

“Digital asset risks will be in a segregated waterfall where the separate guarantee fund is provided by Bakkt, versus the clearing members,” ICE Chairman and CEO, Jeff Sprecher, announced on Twitter.

According to Mr. Sprecher, Bakkt has already set up a workflow, in which bank and brokerage members can serve their customers in the space without taking possession of digital assets.

Crypto’s new hope

After the continuous bear market that has been stalking the cryptocurrency community since early 2018, many see Bakkt as a chance for the market to recover.

Bakkt is a big deal as it will use ICE’s financial technology and infrastructure, offering an open and regulated, global ecosystem for digital assets. According to the firm, their platform will allow investors, merchants, and consumers to buy, sell, store, and spend digital assets, connecting the existing market and merchant infrastructure to the blockchain.

Launching in November 2018, Bakkt is working together with a group of organizations including prominent names, such as Microsoft, Starbucks, BCG, along with others.

As the crypto market is lacking the sufficient regulation, many expect that Bakkt’s US-regulated custody services for large institutional investors will give a boost to the industry. Some even say that this new exchange can be the last piece of the puzzle for the U.S. Securities and Exchange Commission (SEC) to approve a long-waited Bitcoin Exchange-traded Fund (ETF).

Physical futures contracts

Bakkt announced in September 2018 that they will be offering physically delivered Bitcoin futures contracts with fiat pairs (including USD, EUR, and GBP), which will start trading on December 12, 2018.

As opposed to other Bitcoin futures (such as CME’s) where the contracts are cash-settled and based-off the price of the cryptocurrency, Bakkt’s customers will receive a delivery of a Bitcoin from the Bakkt Digital Asset Warehouse at the end of the contract period.

The company is currently waiting for the U.S. Commodity Futures Trading Commission’s (CFTC) approval to become a regulated exchange. Analyst Mike Strutten believes it is very likely that the company will be approved by the US regulator, which will attract capital from thousands of institutional and retail investors.

Attracting a significant number of investors to the cryptocurrency space will increase the demand for Bitcoin – meaning a bullish sign for the coin -, and will mean a large step towards the adoption of digital currencies.