Bakkt: an ecosystem for regulated digital assets

What is Bakkt?

Bakkt

Credit: Pixabay

Bakkt is a new company from ICE, the organisation that owns a number of financial and commodity exchanges (NYSE: ICE). It estimates that the digital asset marketplace could be worth around 270 B dollars. Bakkt may attract big investors into cryptocurrency in the search for yield, leveraging Microsoft cloud solutions to create an open and regulated, global ecosystem for digital assets.

Bakkt main offering is expected to be a futures exchange and clearinghouse for single day, Bitcoin contracts for physical delivery. Rather amusing when considering Bitcoin’s purely digital nature. Regardless, this is still good news for the market overall as trading will involve the actual buying and selling of cryptocurrency.

Bakkt will also provide a warehousing solution. Its August press release noted that the futures and warehousing platform would be available as soon as this month. While it gave no details at the time, it will presumably follow other cryptocurrency exchanges and offer cold-storage options.

Investors of the Bakkt ecosystem include Pantera Capital, Susquehanna International and Galaxy Digital.

Custodial services and regulation

Getting hold of and securing crypto assets in large quantity is still a concern for many would-be buyers. There probably is not a month that goes by without news of a hack or security flaw highlighted somewhere. Managing your own money can be stressful. Managing the money of a pension or retirement fund is another matter altogether.

The Bakkt ecosystem plans to provide an institutional-grade custodial service from the get-go. Furthermore, while other projects and exchanges have suffered from regulatory troubles, Bakkt will be working with the US Commodity Futures Trading Commission (CFTC) and other regulators to re-assure institutions that any potential investments will be compliant before trade begins.

Criticisms

ICE’s focus on the project is clearly on providing the regulation needed for large players to safely invest. Cryptocurrency, however, was designed to be a deregulated worldwide exchange of value. Yet, Bakkt intends to create an open yet regulated global ecosystem of digital assets.

This statement appears to contradict itself and it is unclear how the company plans to handle regulation in other countries where it has no authority. Moreover, questions remain on how Bakkt differs from other well-established exchanges. Coinbase and Gemini have significantly more experience in the crypto space and include institutional trading services.

Final thoughts

Will institutional buyers really usher in the next wave of the cryptocurrency bull market? Despite plenty of predictions from traders, tweeters, and hopefuls alike, it is almost impossible to tell. Regardless, this is still good news for crypto. More exposure to digital currencies can only be a good thing.

The introduction of this new platform indicates that mainstream adoption may be just around the next corner. Bakkt is not offering anything particularly new to the crypto investment landscape. They are, however, backed by a highly trusted name and several big companies. That alone might be all that is needed to tip the scales in favour of the next flood of money into the markets.

This article is an abridged version of an article originally posted at Coincentral.com (a P27 Partner) under the headline “Bakkt: A Global Ecosystem for Regulated Digital Assets”.

CoinCentral’s owners, writers, and/ or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on CoinCentral is investment advice nor is it a replacement for advice from a certified financial planner.