NYSE Parent Launches Physical Bitcoin Futures Contract

Real-world bitcoin trading will now be a reality through ICE, the Intercontinental Exchange which owns the New York Stock Exchange, among others. Bitcoin futures traders can now place bets in physically settled derivative products, as of September 22, 2019.

The platform, launched under a new company called Bakkt, will leverage Microsoft cloud solutions to create an open and regulated, global ecosystem for digital assets. To bolster the use of cryptocurrencies and digital assets, Bakkt is working with leading organizations like the Boston Consulting Group (BCG), Microsoft Corp. (MSFT) and Starbucks Inc. (SBUX).

ICE Launces Digital Asset Platform

By offering bitcoin futures, ICE is stepping into the ring with the CME Group Inc., which introduced bitcoin futures in December 2017. According to the CME more than $200 million worth of CME’s bitcoin futures change hands on an average day. Chicago-based CME said Friday that it would expand into bitcoin options in the first quarter of 2020.

Consumer-facing partners like Starbucks are expected to play a key role in developing practical, trusted and regulated applications for public for them to convert their digital assets into U.S. dollars for use at Starbucks outlets.

By utilizing the trusted brand name and established marketplace infrastructure, the aim of this launch is to build an integrated trading system to allow consumers as well as institutions to buy, sell, store and spend various digital assets on a seamless global network.

“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, consistent with our track record of bringing transparency and trust to previously unregulated markets,” said Jeffrey C. Sprecher, founder, chair and CEO of Intercontinental Exchange.

ICE Bitcoin Futures will be Physically Settled

Bakkt's introductory launch will focus on allowing trading of bitcoin versus fiat currencies. By 2018, Bakkt will introduce a one-day physically delivered bitcoin contract along with physical warehousing, subject to U.S. Commodity Futures Trading Commission (CFTC) review and approval. It means that as a part of the settlement process of ICE-operated bitcoin futures, the bitcoins will be actually delivered on the specified date, unlike other present-day bitcoin futures products that are cash-settled. It is expected to bump up the market activity in bitcoins, as the futures traders will now be required to deliver actual bitcoin holdings.

The trading in the first ever physically settled bitcoin contracts will be based on new protocols that will be specifically established for managing the security and settlement requirements of digital assets. Bakkt will also finance a separate guarantee fund for the purpose.