The proposed launch date of Bitcoin’s first physically-delivered contract, dubbed “Bakkt,” has apparently been delayed. A notice on the website of Georgia-based Intercontinental Exchange, or ICE, currently states the product will be listed on the exchange effective January 24, 2019, subject to regulatory approval.
New details have been posted about ICE’s upcoming bitcoin futures, which – barring any delays from regulators – were initially scheduled to go live as early as the second week of December.
Now, the company has all but confirmed that statement, writing on its website:
“The new listing timeframe will provide additional time for customer and clearing member onboarding prior to the start of trading and warehousing of the new contract. The Bakkt Bitcoin (USD) Daily Futures Contract is a physically-settled daily futures contract for bitcoin held in Bakkt Warehouse, and will be cleared by ICE Clear US, Inc. Each futures contract calls for delivery of one bitcoin held in Bakkt Warehouse, and will trade in U.S. dollar terms. One daily contract will be listed for trading each Exchange Business Day.”
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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.
Wall Street Warm to Crypto
Bitcoin edged closer towards being seen as a mainstream financial investment following the ICE’s headline-grabbing announcement that it will launch a futures exchange for digital assets that will include the first regulated, physically-delivered bitcoin futures contracts. The 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.
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.
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.
So far, the US regulators have not allowed cryptocurrency-based ETFs on the CBOE or elsewhere, partly because of concerns around the unregulated aspect of the virtual asset class. Still, putting physical-settled contracts on a highly scrutinized US exchange could convince its regulators to allow more advanced products such as exchange-traded funds.