Bakkt won US regulators’ approval to trade physically-settled bitcoin futures on ICE Futures US and ICE Clear US. Bakkt Bitcoin Futures To Debut in September.
The company has now received approval from the Commodity Futures Trading Commission (CFTC). Also, from the New York State Department of Financial Services, to launch in late September.
Kelly Loefler, Bakkt CEO, wrote in a blog, “Our contracts have already received the green light from the CFTC. This is through the self-certification process and user acceptance testing has begun.”
“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.”
“Uniquely, Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement prices. Thus serving as a transparent price discovery mechanism for the benchmark price for bitcoin. The importance of this differentiator is only amplified by reports of significant manipulative spot market activity, and other concerns such as inconsistent anti-money-laundering policies and weak compliance controls.”
Bakkt plans to provide both daily and monthly physical Bitcoin futures contracts to institutional traders. This, in turn, could lead to Bitcoin and its crypto friends being accepted mainstream.
She said monthly agreements will allow investors up to 12 months out to view Bitcoin, adding:
“The other thing that’s important about a monthly contract is what it offers is the ability to take [snapshots] at different times throughout the next year so it adds spread trading … and timing of, for example, the halving coming up next year, the contract, you’ll be able to look out into that time period in 2020.”
Therefore, ICE Futures U.S. will provide the real exchange facilities. While Bakkt and its warehouse will provide custody services required by the contracts.
The Bakkt Warehouse is a part of the Bakkt Trust Company. It is built using cyber and physical security protections. They support the world’s most actively traded markets, including the NYSE.
Bakkt is first to hit the market. Although the company faces competition as LedgerX and ErisX are also looking to offer bitcoin futures contracts to investors.