December 2017 was not just the month when the bitcoin price reached $ 20,000, it was also the month in which futures contracts hit the ecosystem. By 2018, it was expected to launch Bakkt, a platform that aims to create a centralized and regulated Bitcoin market to offer the first futures settled on BTC.
A centralized and regulated platform is not the most common of criptomoedas exchanges, so in this work of CryptoNoticias we explain the main characteristics of Bakkt, which will come into operation in 2019.
Bakkt, the market supported by Bitcoin
Announced in August this year, Bakkt is a centralized platform that wants to insert the main criptomo-active in the infrastructure of the Wall Street stock market. An idea that, according to its founders, was born after five years of planning. Bakkt will function as a bitcoins trading system, but protected by United States securities laws, as indicated.
The intention is to "bring new products to existing infrastructures" to attract traditional investors to the cryptography market. Therefore, Bakkt will have functions similar to those of a bureau of exchange, except that they will offer a remuneration and storage package supervised under the parameters of the US Commodity Futures Trading Commission (CFCT) and the Commission. Securities and Securities Exchange (SEC).
This compensation package, the first related to crypto-coins, ensure that the crypto-coins reach the buyer or fail, a remuneration for having lost in the contracts. In addition, Bakkt will offer the purchase of bitcoins and its future contracts through a broker, whose mandatory practice is to comply with Know-Your-Customer (KYC) rules as part of its supervised storage service.
The Bakkt Foundation uses the time-tested and regulated futures market infrastructure to introduce Bitcoin and storage physically delivered to global markets.
On the other hand, Bakkt plans to take care of the storage of purchased encrypted assets and the custody of private keys. This feature may be appealing to traditional investors accustomed to delegating custody of their assets. However, this Bakkt proposal contradicts one of the main practices promoted by the bitcoiner community: be it your own bank, take responsibility for your finances.
It should be borne in mind that verifying user identity with KYC policies implies the subsequent delivery of private customer information to regulatory authorities. This is considered a privacy violation for some bitcoiners. However, Kelly Loeffler, CEO of Bakkt, says that the security of its platform states that part of the keys will be offline.
The private keys will be stored, according to Loeffler, in a vault that deals with "high levels of physical, technological and information security," which include biometric scans, fragmentation, and multiple signatures.
Settlement of Bitcoins
The impressive offer for traditional investors is not just that it works according to the regulatory standards they are accustomed to participating in, but Bakkt aims to become the first company to settle a future contract in bitcoins directly. That is why they say that it is necessary to watch over the bitcoins of contracts.
Although the Bakkt was designed as an exchange, it initially proposes to offer future contracts of Bitcoin. This first product, unlike the CME and the Cboe, will expire one day. In addition, according to its web platform, the Bitcoin Bakkt (USD) will be issued by 1 BTC in exchange for US dollars. Parity is established 1: 1, a contract, a bitcoin. That amount may seem high to the microinverters of cryptography, but like the rest of its proposal, Bakkt's future contracts target institutional investors.
As Bakkt is a subsidiary of International Exchange, the purchase and offer of Bakkt Bitcoin will be made through ICE Futures (International Exchange). In addition, according to Loeffer, these contracts will be pre-funded, a practice that seeks to eliminate the risk of breach of contract.
Considering the bull market that has received the other futures contracts and noting the slowdown that the cryptography market has had in recent months, the question is how will Bakkt futures affect the market?
According to some analyzes, the settlement of futures contracts with physical settlement directly in bitcoins can be beneficial to the ecosystem. This would be linked to the fact that transparent, regulated and secure trading and storage could lead to an increase in institutional demand and liquidity, which could reduce the volatility of cryptoactives.
What about the regulation?
The sale of futures contracts requires the approval of the United States Commodity Futures Trading Commission, that is, the designation as a contract market by the CFCT. However, Bakkt can self-certify its future product without the immediate approval of the regulator, according to the legal expert Jake Chervinsky, falls under one exception to the rule.
To start selling bitcoin futures Bakkt just needs to present his papers. So far, there is no known date for the publication of details of Bakkt's future contract, but contract markets can present self-certification papers up to one business day before listing them at their brokerage.
Recall that Bakkt is a trading platform affiliated with the futures exchange ICE Futures US, formerly known as New York Board of Trade. ICE Futures is one of the six clearing houses managed by the US-based International Exchange (ICE), which has been operating since 2000 when it was founded by Jeffrey Sprecher.
ICE Futures is currently the second largest owner of financial revenue exchanges behind the Chicago Mercantile Exchange, the company that started offering bitcoins futures last year. In addition, ICE owns NYSE American, the New York Stock Exchange and the Arca, the world's leading futures market. Therefore, ICE and its subsidiaries have the structure approved by US regulators to operate financial markets, and that is what they plan to exploit.
Despite the certain autonomy enjoyed by ICE, Bakkt can not completely ignore the CFCT's resolution, as the Futures Trading Commission still has authority over self-certified financial products. However, self-certification the day before was the measure taken by CME and Cboe a year ago, so a similar scenario is expected for Bitcoin Bakkt.
The long-term bet
Competing with other companies that offer institutional investment in encryption, such as Coinbase, Grayscale, Ledger, Gemini and BitGo, is not Bakkt's long-term goal, as this platform is designed to serve Wall Street investors by supporting them. payments. According to Loeffer in an interview with Fortune, this responds to the fact that Bakkt will develop business in two stages.
The first is linked to the launch of Bitcoin's future contracts. From the second phase so far, there is no further information, but Bakkt's co-founders mentioned the intention to promote a change in the way users pay in shopping malls and online. "We are collaborating to build an open platform that helps unlock the potential for transforming digital assets into global markets and commerce," Loeffer said.
It is important to note that, from the outset, Bakkt has partnered with Microsoft, a leader in e-commerce services with Azure services; Starbucks, a coffee giant that already encourages its customers to pay with telephone payment services instead of credit cards and the Boston Consulting Group, a strategic consulting firm.
Bakkt's bitcoin futures are slated to be released on January 24, 2019. This date was announced by financial executives after postponing the marketing of the announced futures for December 12.
In addition to the new release date, Loeffer announced in November that are considering adding futures linked to other crypto-currencies, but expect to rely first on the evolution of the market and the opinion of its customers.
Future markets and particularly those of Bakkt have created many expectations throughout the year. However, there are those who say that these expectations should be ignored. On the other hand, a study by Diar estimated that traditional investors prefer over-the-counter markets to bureaux de change.
One month after the launch of the future, the questions are many.
Will that change anything that these futures are settled on bitcoins? Will it impact the price of the BTC?
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