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Digital Currency Execs: Bakkt's Imminent Launch Signals Institutional Participation In Crypto

August 26, 2019 12:35 pm
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Digital Currency Execs: Bakkt's Imminent Launch Signals Institutional Participation In Crypto

Bakkt, a subsidiary of New York Stock Exchange owner Intercontinental Exchange, has finally announced a launch date for its physically delivered Bitcoin Futures: Sept. 23.  

This could signal the beginning of institutional participation in crypto, according to industry players. 

The U.S. Commodity Futures Trading Commission gave the green light to launch the company.

User acceptance testing has begun, Bakkt CEO Kelly Loeffler said in a statement posted on Medium. 

"With approval by the New York State Department of Financial Services to create Bakkt Trust Company, a qualified custodian, the Bakkt Warehouse will custody bitcoin for physically delivered futures," she said.

"This offers customers unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure."

Why It's Important

Guy Hirsch, managing director of eToro U.S., said Bakkt’s clearance to launch not only signals imminent institutional participation in crypto markets, but a new level of understanding and approval from regulators — specifically the New York Department of Financial Services.

“As regulators continue to approve more projects, industry participants are gaining a clearer understanding of what is required in order to build out digital asset offerings for U.S. investors,” Hirsch said. 

Hirsch said he hopes to see the New York Department of Financial Services continue to foster a more “competitive environment” for businesses, and added that New York is the financial center of the world.

The state is in a great position to maintain that title if regulators can build frameworks that are inclusive of emerging technologies like digital assets, he said. 

The Thirst To Be First 

Vaibhav Kadikar, founder and CEO of CloseCross, a decentralized prediction markets platform, said LedgerX’s Bitcoin Futures offering was not approved by the CFTC, contrary to earlier reports

“In the long run, it won’t matter who brings the product first to market. The difference will be in the execution and the customer experience, as well as other services clients can get out of the same platform,” Kadikar said. 

Bakkt's ties to ICE and New York state approval are increasing the anticipation around the offering, he said. 

“The highly anticipated offering from Bakkt bears more weight due to its ties with ICE, in addition to approval from the New York State Department of Financial Services to create the Bakkt Trust Company, a qualified custodian," Kadikar said.

"Bakkt is better-positioned due to it being a trust that can provide a wider set of services and products, carrying with it custodian credibility to provide to institutions." 

By operating as a trust in the state of New York, Bakkt has a lot of flexibility compared to competitors to enter adjacent markets and perform the roles of exchange traded fund provider, asset manager and the like, he said. 

"Bitcoin Futures have been making the headlines since CME launched Bitcoin Futures at the height of the 2018 boom, but not necessarily for the right reasons. Around the world, influential financial authorities have been rigorously scrutinizing the implications of crypto derivatives."

The launch of Bakkt could result in more assets flowing to Bitcoin, the CEO said. 

“Following the launch, price discovery through futures instead of spot markets could dramatically shape spot prices. Pending the launch, this has the ingredients for more capital influx into the Bitcoin market, bringing us one step closer to institutional adoption." 

Price Action

Bitcoin was trading 2.13% higher at $10,326.86 at the time of publication Monday. 

Related Links:

'A Framework': UK Issues Cryptocurrency Guidance

As Facebook Prepares To Launch Libra, Regulators Are Watching

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