Intercontinental Exchange (ICE), owner of arguably the most important stock exchange in the world, the New York Stock Exchange (NYSE), is introducing a new company, Bakkt. The idea is to weave bitcoin into 401(k)s, credit cards, and retail. The project is getting a lot of hype due in large measure to two very powerful backers: Microsoft and Starbucks. Is this the mainstreaming ecosystem enthusiasts have been urging?
NYSE Wants Bitcoin in 401(k)s, Credit Cards, Retail Stores
ICE’s digital assets head, turned CEO of the new project Bakkt, Kelly Loeffler, explained in a company blog, “Formed by Intercontinental Exchange — an operator of global exchanges, clearing houses, data and listings services — Bakkt will work with companies that include BCG, Starbucks, Microsoft and others, to create an open ecosystem that supports growing needs in the ~$270 billion digital asset marketplace.”
ICE quietly owns and operates two dozen regulated markets and exchanges, from the United States and Canada to Europe. It also holds clearing houses in the Netherlands, Singapore, greater Europe, the US, and Canada as well. It has revenues well in excess of $5.5 billion. It’s also the parent company for the NYSE, an exchange with great prestige among traditional finance: the NYSE is 226 years old, and is easily the globe’s biggest exchange by market cap, some $21.3 trillion as of last summer.
Ms. Loeffler told Fortune how for over a year ICE built Bakkt in secrecy. The company name is a twist on asset backed securities, Bakkt, which by design is to engender trust. And trust is everything in the legacy marketplace, but it has a decidedly different meaning in the cryptocurrency world. Trust on Wall Street usually means regulations, and lots of them.
Indeed, by late Fall this year, Bakkt hopes to have a fully federally regulated space for all things bitcoin. Fortune notes how “ICE aims to transform Bitcoin into a trusted global currency with broad usage.” That’s an interesting admission for enthusiasts wondering what Wall Street is ultimately up to with this enormous announcement and marketing/public relations campaign. Trust in the Bitcoin ecosystem is established through mathematics, voluntary adoption, by completely bypassing third party fragility, frictions, and gatekeepers for which legacy finance is famous.
Speculation and Coffee
“By combining regulated infrastructure with institutional and consumer applications,” Ms. Loeffler continues, “we’ll apply our track record of bringing transparency and trust to previously unregulated markets. In this way, we intend to play a key role in boosting institutional, merchant and consumer participation in digital assets.” Investment, also according to Fortune, includes Boston Consulting Group, Fortress Investment Group, Eagle Seven, and Susquehanna International Group in addition to better known brands Starbucks and Microsoft.
No doubt, ICE’s endorsement of Bitcoin lends a great deal of credence for other Wall Street investors to start exploring the cryptosphere. A futures market appears immediately in the works. Ms. Loeffler’s blog post details, “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.”
Fortune believes the bigger move Bakkt is proposing involves everyday retail ventures. “Using Bitcoin to streamline and disrupt the world of retail payments,” the magazine stressed, “by moving consumers from swiping credit cards to scanning their Bitcoin apps. The market opportunity is gigantic: Consumers worldwide are paying lofty credit card or online-shopping fees on $25 trillion a year in annual purchases.” Both Microsoft customers and Starbucks customers are very familiar with digital, smartphone related transactions. Transitioning over to bitcoin, with institutional blessing, should be a snap, ICE is assuming.
Starbucks’ Vice President of Partnerships and Payments, Maria Smith, was quoted in the press release, noting, “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 U.S. dollars for use at Starbucks.” That also appears to fly directly in the face of Bitcoin’s ultimate point. To nearly everyone familiar with its power, bitcoin as a currency is an end in-and-of-itself, it is the value, and was meant to leave fiat — not to be simply a keen transfer mechanism to government paper. Nevertheless, Bakkt’s CEO, Ms. Loeffler, concludes, “We’re excited about the opportunity to help unlock the transformative potential of digital assets across global markets. Bakkt is preparing for launch in upcoming weeks, and we look forward to keeping you updated.”