Intercontinental Exchange, the world's second largest exchange group by market value, is launching trading in bitcoins futures next month, a long-awaited bid to lure more
Bakkt, the business set-up by the Atlanta-based group a year ago to develop infrastructure for digital assets, said on Friday that it would launch two physically-delivered bitcoin futures contracts
Bakkett confirmed it would provide custody for the futures after gaining a trust from the New York State Department of Financial Services. Safekeeping of crypto assets has been a big concern of institutional investors, because it has exchanges have repeatedly suffered hacks and outages.
The futures products, which had received a green light from the Commodity Futures Trading Commission, will list on the US ICE Futures derivatives exchange, while ICE’s clearing house will clear them.
Institutional interest in the crypto assets market has waned since ICE announced in August 2018, "digital wild west". In March, Cboe Global Markets, the first US derivatives exchange to offer bitcoin futures, pulled the plug on its product after volumes dried up.
Nevertheless, bitcoin proper continues to attract speculative traders at a time of negative bond yields, which have increased the relative appeal of yieldless assets such as gold. The price of bitcoin has rallied from $ 4,000 in April to about $ 10,000 today.
In addition, Libra's Facebook plans to launch its own digital currency, raised hopes among crypto advocates that digital currencies may be used as a medium of exchange.
Kelly Loeffler, Bakkt’s chief executive, said that ICE had received demand for the leveraged products that typically trade ICE’s commodity, currency and stock index contracts.
Unlike existing futures contracts, which track prices are based on an aggregated data, the derivatives will be based on “deliveries” of actual bitcoin to a highly secure “warehouse”, the company said. This will be protected by $ 125m in insurance, it added.
ICE has also contributed an extra $ 35m to its existing $ 68m guarantee to its clearing house.
"The market was really built around retail participants," said Ms Loeffler. "So stepping back and designing the market around institutional needs will help bring in more sophisticated participants."
Rather than just for speculative purposes, the company said it is intended to see crypto-focused businesses, such as cryptocurrent mining companies.
Other financial services firms are seeking to develop services to store crypto assets safely. Fidelity, the US asset manager, has been working on a dedicated custody service, while it has recently acquired the custody business of wallet providers for a push into the institutional custody business.
The company said it had immediate plans to launch futures based on other popular cryptocurrencies, such as ethereum.
Separately, Bakkt is working with Starbucks to give coffee to drinkers, which Ms Loeffler said would launch "in the coming months".
Initially looking for regulatory oversight for its business from the CFTC, before turning to the NYDFS in April this year. Bakkt's license to operate from New York's state financial regulator makes it the 22nd crypto company to receive one.
"This approval demonstrates New York's competitiveness as a hub of innovation and leadership in emerging technologies," said Linda Lacewell, superintendent.