NYSE Owner to Launch Cryptocurrency Exchange, Physical Bitcoin Futures

The news is another example of a traditional Wall Street giant diving into the nascent market for virtual coins.

Intercontinental Exchange, the parent company of the New York Stock Exchange, along with coffee giant Starbucks, Microsoft and BCG are developing an online platform, dubbed “Bakkt,” to buy, sell, store and spend cryptocurrencies.

Georgia-based Intercontinental Exchange, or ICE, will launch a futures exchange for digital assets that will include the first regulated, physically-delivered bitcoin futures contracts next November. The mainstream, established futures exchanges, including those run by Cboe Global Markets and CME Group, already offer bitcoin futures, but they are cash settled, meaning the actual cryptocurrency does not change hands.

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But the new operations at ICE, which involves the transfer of the cryptocurrency instead of cash, would provide direct access to the digital asset by putting the actual Bitcoins in the customer’s account at the end of the trade. This allows market makers to effectively hedge their exposure across multiple exchanges. And as for security issues, there have been concerns that the cash-settled process can be manipulated too easily.

“The development of Bakkt by Intercontinental Exchange and its partners is a milestone for the industry. The project combines some of the most respected firms in technology, retail, and finance to create an all-in-one ecosystem for both institutions and consumers. Moreover, the platform’s focus on removing significant obstacles that previously prevented consumers from using digital assets will help make the mass adoption of digital assets a reality,” Chris Yoo, Portfolio Manager at crypto hedge fund Black Square Capital, told Finance Magnates.

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Wall Street Warm to Crypto

Pending the US regulators’ review and approval, the news is another example of a traditional Wall Street giant diving into the nascent market for virtual coins. Last week, Nasdaq hosted a meeting in Chicago where about half a dozen cryptocurrency and mainstream companies discussed ‘how to encourage the cryptocurrency industry to do thing that will improve its image and validate its potential role in global markets.’

The Bakkt venture will leverage Microsoft cloud solutions and ICE’s expertise to create a federally regulated ecosystem along with merchant and consumer applications. Its first use cases will focus on Bitcoin trading and exchange against fiat currencies.

The exchange operator said in a statement: ”As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.”

Maria Smith, VP of partnerships and payments at Starbucks, added: “As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks. As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”

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