The CEO of the upcoming ICE/New York Stock Exchange-backed collaborative crypto-investment platform, Bakkt, has been explaining how it will bring crypto and traditional assets closer.
Kelly Loeffler has apparently heard plenty about what’s wrong with Bitcoin and crypto markets since being announced as the CEO of Bakkt in early August. The launch of the venture heralded the involvement of a host of household names in a project that looks like a legitimate attempt to open up the cryptocurrency space to mainstream financial players. Now, Loeffler has returned to the Bakkt blog to explain more about how it’s going to work.
“Over time,” Loeffler observes, “markets generally evolve toward a model that instills confidence in forming prices, establishing value and facilitating commerce.”
“This is the foundation on which we designed Bakkt.”
In the new statement, the CEO explores issues surrounding Bakkt’s attempt to “address the unique requirements of regulated institutions, their clients and stakeholders, such as merchants and consumers,” and looks to stress some of the point that the Bakkt team thinks will differentiate it from the existing options for crypto-investment.
“Our goal is to make digital assets more liquid, trusted and accessible;” Loeffler asserts, “allowing meaningful innovation to follow.”
To this end, Bakkt has identified three areas where it feels it can improve on current offerings: building on existing infrastructure, security standards and access to markets and information.
Building on an exisiting platform is, Bakkt believes, a chance to “close the gap between the frameworks for mainstream asset classes and digital assets.”
That’s not something many of the more libertarian-leaning Bitcoin advocates will be happy to hear – and the ‘financialisation’ of cryptocurrency is something that commentators like Caitlin Long have warned against already – but, nevertheless, Bakkt sees it as vital to its goal of attracting institutions to invest in the space.
Bakkt will use “existing, time-tested, regulated futures market infrastructure” in its initial offerings, that will include “institutional-grade onboarding and compliance… This includes consistent standards for compliance, with anti-money laundering and know-your-customer rules, market surveillance, and reporting standards at the federal regulation level, subject to final review and approval by the U.S. CFTC.”
Also, Loeffler adds, by “passporting ICE Futures U.S. and ICE Clear U.S. into other jurisdictions outside the U.S., institutions operating on a global scale can better serve their customers.”
Tapping into a currently hot-topic in the cryptocurrency space, Bakkt’s “trading, clearing and warehousing infrastructure will offer a new level of technology and financial security built on a resilient technology backbone,” with key parts of the network air-gapped from the internet. Bitcoin deposits will largely be cold stored offline, we’re told. Financial security will come from pre-funded purchases and sales of BTC, as well as a fund dedicated to off-setting losses from the Bitcoin assets of its clients.
Bitcoin custody and insurance have been big issues for the sector of late. HyperVault CEO Sean Walsh spoke to us recently about their new institutional-grade custody servicing, saying it was vital to drawing in the “99.9% of the fiat money” that he sees as “still sitting on the sidelines of crypto,” but waiting to “jump into the pool.”
For it’s part, Bakkt – or at least Loeffler – believes the “connectivity and participation requirements of large financial institutions necessarily differ from retail participants on unregulated cash-market crypto-exchanges” and will court them first. Which is part of the reason the service kicked-off its blogs by talking about how it would determine and communicate price.
“Our initial focus,” they say, “is supporting regulated institutions in serving customers in this emerging asset class.”
Bakkt, will thus be built “upon the time-tested, regulated futures markets - which have advanced markets ranging from coffee to gold for hundreds of years.”