The owner of the New York Stock Exchange wants to make bitcoin mainstream. What counts as mainstream? Traditional investors and financial institutions. If you can get the old money to feel comfortable trading new money, you can bring a huge new wave of investors to the cryptocurrency game – and maybe even stabilise it. That’s the promise of Bakkt, a new platform hoping to become the on-ramp of the institutional investor.
We learn more about it below.
What is Bakkt?
Bakkt is basically the New York Stock Exchange (NYSE), but for bitcoin. It will provide institutions with the chance to buy and sell digital assets in a US federally regulated environment. That means they can experience the ease, volume, and security for bitcoin that they already enjoy on traditional exchanges.
At the moment, traditional investors shy away from bitcoin because of its lack of infrastructure and regulation. Bakkt hopes to lure them in by offering a highly regulated space for products like bitcoin mutual funds.
Who created Bakkt?
Bakkt is the product of Intercontinental Exchange (ICE), owner of the New York Stock Exchange (NYSE). ICE is run by Wall Street giant Jeffrey Sprecher, who also serves as the chairman of NYSE. He appointed Kelly Loeffler as CEO of Bakkt, formerly the CMO of ICE.
Sprecher noticed that many traditional investors were itching to get involved in cryptocurrency, but they needed it to be packaged and regulated in the right way. So ICE created Bakkt to meet investor demand.
Did you know?
Bakkt’s CEO Kelly Loeffler is ranked in Worth Magazine’s top 100 most influential people in global finance.
A brief history
August 2018 – The Bakkt platform is announced by parent company Intercontinental Exchange (ICE)
December 2018 - Bakkt raises $182.5 million in funding round
January 2019 – Expected launch of Bakkt (pending regulatory approval)
What’s so special about it
Bakkt is still the new kid on the block, but it’s already labelled as the way to make bitcoin mainstream. Even titans Microsoft and Starbucks have thrown their weight behind it.
The platform provides a way for traditional investors to get involved in bitcoin with the oversight of US federal regulation. The company is working with the Commodity Futures Trading Commission for approval – which will bring requirements like compliance, anti-money laundering rules, and strict reporting standards.
That could be the assurance that big time institutional investors need to finally dive in to crypto. The company has said its goal is to turn bitcoin into the world’s first worldwide currency.
How does Bakkt work?
Bakkt is a platform for institutional investors to buy, sell, and store digital assets on a global network. The idea is that Bakkt will give investors the chance to trade assets and futures based in bitcoin the same way they would traditional currencies and commodities.
Bakkt will also offer warehouse storage for the safekeeping of bitcoin. Storing a customer’s private keys “offline” will add layers of security and thwart hackers – bringing more peace of mind to traditional investors.
The platform has also come up with a way to tackle blockchain’s biggest drawback: slow speed. Since a lot of the transactions will happen between customers with assets already stored in the warehouse, it isn’t necessary to put every single movement on the blockchain. Anything that happens within the warehouse will be recorded on Bakkt’s own separate ledger. Only assets coming in or leaving the warehouse will need to be on the blockchain.
In that sense, parent company CEO Sprecher says it will “operate on a layer above the blockchain.”
What can you do with Bakkt
Bakkt is a way for institutional investors to embrace bitcoin in a way they’ve never been able to before. The company’s CEO Kelly Loeffler says it will simplify the movement of global money.
She claims Bakkt will solve two fundamental problems that prevent bitcoin from widespread acceptance.
- 📈 Infrastructure: Bakkt’s platform will provide regulated infrastructure for buying and selling bitcoin.
- 🔍 Price discovery: Loeffler says one reason traditional investors resist digital asset investment is that it’s hard to know the exact price of a given cryptocurrency. Different exchanges will have the same cryptocurrency listed at different values - known as the “price discovery”. Bakkt wants to create trusted, regulated price discovery so investors can have full confidence in buying and selling. If they do manage to crack it, Bakkt stands a high chance of luring the traditional investors they seek.
For all the fanfare around Bakkt, it definitely has its critics. There is a firm camp of bitcoin enthusiasts who insist the currency needs to be decentralised. Having a middleman control the exchange goes against the whole purpose of bitcoin.
The other side says bitcoin can’t grow without regulation and infrastructure. Getting more traditional institutions to invest in bitcoin could normalise it – and potentially help smooth out its wild volatility.
It’s still early days for Bakkt, but the company certainly has ambitious plans. It is only focusing on bitcoin right now since it’s the most liquid and widely distributed digital asset, though it has hinted at expanding to other cryptocurrencies in future.