Big news coming from Wall st.
The Intercontinental Exchange (ICE), parent company of the NYSE and several other global exchanges and clearing houses, have announced a new venture called Bakkt
(as in "backed"), with the financial backing of both large corporates (Microsoft, Boston Consulting Group, Starbucks) and financial institutions (Fortress, Eagle Seven and Susquehanna). Aim of the venture is to take bitcoin mainstream by providing a federally regulated "on-ramp for institutional, merchant, and consumer participation in digital assets by promoting greater efficiency, security, and utility"
. One of the largest owner and operator of the infrastructure of 'old' financial system will be head to head competing with the native crypto players, but no doubt unlocking a bigger pie
Starbucks involvement is particularly fascinating, since their app powers mobile payments for something close to 25M
users in the US alone (bigger than Apple Pay): "Starbucks will play a pivotal role in developing practical, trusted, and regulated applications for consumers to convert their digital assets into U.S. dollars for use at Starbucks”
From a technical perspective, subject to CFTC review and approval, Bakkt will operate as physical-backed futures exchange on a centralized L2,
where transactions won't touch the blockchain unless they enter or leave the digital warehouse. For an analysis of the implications of this type of "leverage-based financialization" of bitcoin we reccommend reading Caitlin Long's excellent piece
So this may set the scene for how institutional crypto will play out:“To evolve, the cryptocurrencies need to run on established infrastructure. They need the trust and rules that have been built into our financial system for many years. They need the kind of trust that the Big Board represents.”
says the CEO of ICE.
While sounding like a rather backward-looking statement, it does raise the question of what sort of trade-offs will need to be made to take bitcoin, or crypto more broadly, mainstream. A maximalist view
is that bitcoin is not meant to replace public market infrastructure, it's only meant to disrupt money.
Lots to unpack as usual, overall it's a major piece of news with large ramifications for the industry.