After a year of working to appease the regulators, the Intercontinental Exchange’s young subsidiary Bakkt announced it had acquired a New York state trust charter, through the New York State Department of Financial Services, to launch Bitcoin Futures.
In a time where institutional cryptocurrency investment is once again ramping up; with the SEC mulling over Bitcoin ETFs and Coinbase bragging about the money it is counting, this highly-anticipated go-ahead from regulators will see physically-settled bitcoin futures contracts come to fruition.
The company intends to launch its products on Sept. 23.
A quick definition of futures: “Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. Here, the buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.”
Reading that, it makes sense why Bitcoin futures are such a prized thing as this allows for investors to bypass the famed volatility of the cryptocurrency market. These first came to market in December 2017 when CME and CBOE opened their institutional Bitcoin futures.
Bakkt has said it intends to offer two types of contracts. One will be daily, monthly, which will allow for quick turnarounds in the volatile cryptocurrency markets, or longer gambles on where the price will be in a month.
The offering from Bakkt has undergone some stringent regulatory checks, but CEO Kelly Loefler says they have got all the green light they need.
“Our contracts have already received the green light from the CFTC through the self-certification process, and user acceptance testing has begun,” Loefler said.
“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. This offers customers unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure.”
The news is positive, for Bakkt, and the general cryptocurrency space as the thing holding them back was the regulators who are now on board. But, it is unlikely to change the market substantially.
Instead, it adds another arrow to the quiver of those pushing regulators to take cryptocurrency seriously and to normalize it as an investment tool, or as an alternative currency. If the Bitcoin market is good enough for the CFTC, and the notoriously difficult New York State Department, it should persuade a few others in the US, and well as abroad.