The parent company of New York Stock Exchange (NYSE) – Intercontinental Exchange (ICE has raised funds from prominent investors including Boston Consulting Group, Microsoft’s M12, Pantera Capital, PayU, Goldfinch Partners and CMT Digital for its crypto trading unit called Bakkt.
While global markets live in a state of disarray, as the world deals with the ongoing impact of COVID-19, there is one entity which has just raised $300 million to accelerate itself into the new world order of digital assets.
The parent company of New York Stock Exchange, Intercontinental Exchange, a leading player for global equity exchange, fund clearing houses and provider of data and listings services, now has procured funds from prominent investors including Boston Consulting Group, Microsoft’s M12, Pantera Capital, PayU, Goldfinch Partners and CMT Digital for its crypto trading unit called Bakkt. The recent fundraising round (series B) has brought the value of total funds raised so far by Bakkt to about $500 million.
ICE’s aim is to push more synergy and connected across digital wallets, transaction processing and payment terminals, there are significant possibilities for traders, merchants, banks, exchanges and end consumers and to smoothly transact using cryptocurrencies and other tokenised digital assets. This form of transactional structure is unprecedented and transformational for the finance, banking and payments sector.
Idea Behind Bakkt
NYSE owner Intercontinental Exchange (ICE), tech giant Microsoft, and Starbucks first partnered to launch Bakkt, a company that would form an open but regulated environment for digital assets so they can connect with the real financial world. The cryptocurrency ecosystem is currently fragmented and highly unregulated, which leads to events like hacks, thefts, money laundering, tax evasion and other such shady things.
Bakkt provides users authority over their own digital assets. Whether it’s airline miles, loyalty points from a local grocery store or bitcoin users have bought, the Bakkt app allows users to aggregate all of these assets into a single digital wallet.
Regulated Trading Of Crypto Assets Under The Umbrella Of New York Stock Exchange
In 2019 Bakkt launched the first end-to-end regulated market for bitcoin and an institutional bitcoin custody offering. The New York State Department of Financial Services granted a permit to Bakkt Trust Co. to hold custody of customers’ assets and digital tokens. Previously, its application for Bitcoin futures contracts had been granted from the U.S. Commodity Futures Trading Commission following a self-certification manner. The first contracts were offered on September 23, 2019.
Unlike rival CME Group’s cash-settled bitcoin derivative contracts, Bakkt’s bitcoin futures trade are physically settled, implying that when the period of the trading contracts ends, the seller of the contract must give actual bitcoin to the buyer. This is a game-changing move which would further legitimise bitcoin as a commodity like gold, and would also create custody solutions for securing the assets.
Capturing The Trillion Dollar Retail Segment
Bakkt is also working to reach to the consumer market through their much-awaited consumer app for blockchain and crypto-based loyalty, game card and credit services and wallet. The wallet is set to launch in 2020, marking the beginning of a new era for ICE. The app will assist users across the globe make purchases in crypto-assets and blockchain-based tokens. This was also the inception idea at the time of the formation of Bakkt when ICE and Starbucks and Microsoft first came together to leverage the crypto opportunity. The initial idea was to enable retail users to shop using cryptocurrencies, for things like coffee, all the way to paying insurance premiums and buy stocks.
According to ICE, digital assets include items as assorted as loyalty and rewards points, in-game assets, merchant issued value, and cryptocurrencies, and together amount to almost $1 trillion in consumer spending power. Notwithstanding the huge extent of this market, consumers yet see digital assets to be difficult to access, and frustrating to maintain track of.
Also, the ICE group is vigorously working on launching Bakkt into the retail area with its newest purchase of a loyalty solutions company. Joining into the retail user market, ICE has announced that it has accepted to take over Bridge2 Solutions.
The Bakkt consumer application, which is planned to be rolled out in the coming months is much more than a basic crypto wallet for storing digital assets on a public blockchain. Bakkt consumer front will aggregate different category of assets which cover all the way from crypto, to cash, loyalty units, and even in-game reward points. Then the assets can be smoothly converted with assets to Bitcoin, Ethereum, cash, etc. and trade across those can take place within the mobile app. All payments can be made through the Bakkt Card.
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Vishal Chawla is a senior tech journalist at Analytics India Magazine and writes about AI, data analytics, cybersecurity, cloud computing, and blockchain. Vishal also hosts AIM's video podcast called Simulated Reality- featuring tech leaders, AI experts, and innovative startups of India.