Intercontinental Exchange, the world’s second-largest exchange group by market value, has deepened its involvement in digital currencies with a new company that aims to make them mainstream for institutional investors and consumers.
The Atlanta-based group on Friday announced plans to launch Bakkt, a business that plans to build infrastructure allowing easier use of digital currencies for everyday transactions. Earmarked to lead the venture is Kelly Loeffler, ICE’s head of investor relations and the wife of Jeff Sprecher, chief executive.
The company’s first step would be the launch of bitcoin futures deliverable in one day, effectively tracking spot prices under the umbrella of a regulated exchange and clearing house.
Devotees of digital currencies tout them as an alternative to conventional money, but they have sputtered as a medium of exchange.
They have instead become tools of speculation. The price of bitcoin was $7,463 on Friday, down more than 60 per cent from a high of nearly $20,000 in December. Cash exchanges operate under minimal regulation and hackers have stolen hundreds of millions of dollars from some.
Indicating its ambitions, ICE is working with Starbucks to give coffee drinkers a way to convert digital currencies into dollars to make purchases. Maria Smith, Starbucks’ vice-president for partnerships and payments, said in a statement that it sought “expanding payment options for our customers”.
ICE’s move follows the December 2017 debut of bitcoin futures by exchange rivals CME Group and Cboe Global Markets, both based in Chicago. Their adoption was seen as an important step towards adding institutional credibility to cryptocurrencies, but volumes to date have been modest.
Bakkt’s bitcoin futures intends to list on the ICE Futures US derivatives exchange, a home to commodity, currency and stock index contracts. Unlike existing contracts, which track bitcoin price indices, ICE futures would be based on “deliveries” of actual bitcoin to a new “warehouse” the company plans to develop. ICE plans to create a separate guarantee fund, financed by Bakkt, to back the transactions at its clearing house.
“In bringing regulated, connected infrastructure together with institutional and consumer applications for digital assets, we aim to build confidence in the asset class on a global scale,” Mr Sprecher said in a statement.
ICE plans to hold a majority stake in Bakkt. Other investors include Alan Howard, the co-founder of UK hedge fund Brevan Howard; Eagle Seven and Susquehanna, two leading proprietary trading firms; and M12, the venture capital arm of Microsoft, which is helping to develop cloud technology underpinning the venture.
ICE has since 2015 had a minority stake in Coinbase, a bitcoin exchange based in San Francisco. Bakkt would be separate from that company, ICE said.
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