ICE Plans a Future for Bitcoin, as NYSE Announces Potential Integration into 401k and Other Investment Opportunities
The goal for the crypto industry, at least over the last year, has been to become more mainstream and more user-friendly. This morning, the New York Stock Exchange’s owner, the Intercontinental Exchange (ICE), reveals their new startup that they have in the works called Bakkt, which will hopefully encourage trust in using cryptocurrency globally.
Bakkt is not planned for release until November, but it will offer a platform that is entirely regulated by the federal government, and it seems to be exclusive to Bitcoin. They have already formed partnerships with many of the big names in technology, consulting, and retail to have a wide spectrum of knowledge about the topic. Microsoft, Boston Consulting Group, and Starbucks are just a few of the companies joining in, though ICE is keeping quiet about the actual monetary value of the investments made in it.
Overall, the hope of the exchange is to make Bitcoin more secure and seamless for the big financial institutions, which presently hold the harshest opinion of it. Over time, this project will become commonplace to use for mutual funds, pension funds, and ETFs, just like mainstream investments. However, it will also come with the same regulations.
Some experts suggest that the next step for Bitcoin, after this massive integration, will be to take the same place of the credit cards in use today. The current head of ICE’s digital asset department, Kelly Loeffler, will be the new CEO of Bakkt, and she said, “Bakkt is designed to serve as a scalable on-ramp for institutional, merchant, and consumer participation in digital assets by promoting greater efficiency, security, and utility.” She also noted, “We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.”
Loeffler has already been discussing these concepts in interviews for many news publications. In one such interview with Fortune, she spoke about ICE and the partners that have been working on their new platform for over a year now, with the name only being conceived within the last few weeks. It is hoped that the name, which is a variation of the word “backed,” will encourage users that they can trust their investments with the exchange.
If everything works as ICE has set it up, then the industry can safely use Bitcoin for common investments, especially for a 401k, which would be a major victory for Bakkt. By normalizing Bitcoin in these types of funds, millennials that have interest in cryptocurrency can have an easier understanding of their financial investments. Similarly, Wall Street may even offer the ability to use crypto instead of a classic stock or bond. As soon as it hits the mainstream market, the buying and selling of funds would make the price of Bitcoin skyrocket.
Even with these big plans for a 401k and IRA crypto asset, Bakkt aims for higher goal – moving from credit cards to Bitcoin apps for payment in retail stores. Right now, consumers pay upwards of $25 trillion on their credit card, which is entirely subject to fees, especially for late payments. During the first phase of their plan, the company is highlighting the integration of institutional investors, while the second phase has been noticeably secretive. Based on the way that they are using Starbucks and Microsoft right now, it seems safe to assume that this stage will integrate the use of crypto into retail payments both online and in person.
In a statement from Starbucks vice president Maria Smith, she said, “As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted, and regulated applications for consumers to convert their digital assets into U.S. dollars for use at Starbucks.”
Jeff Sprecher and ICE
Jeff Sprecher, the founder, chairman, and CEO of ICE, is the one that produced the concept of Bakkt, and his performance in bringing a modern approach to crypto exchanges is unmatched. As he has improved the efficiency of the digital marketplace, Larry Tabb of the Tabb Group says, “In 25 years he’s gone from nothing to the most powerful exchange entrepreneur in the world. He hasn’t failed yet.”
Right now, the only entity that surpasses ICE as the largest owner of profitable exchanges is the CME. Since its conception, it has made a major mark in the industry, which is only supported by holding onto NYSE, the biggest stock market. ICE is the owner of multiple platforms (including NYSE American and Arca), though they also lead the “soft” agricultural industry, which incudes commodities like cotton and coffee. With so many victories, it should almost be a given that they want to make Bitcoin into something that Wall Street and Main Street investors love mutually.
This unique mission is being headed up by Kelly Loeffler, as stated above. She has been married to Sprecher since 2004, during which time she has run various departments for ICE, including the marketing and communications sectors. However, she must leave behind her roles with ICE to be the CEO and the promotional face of Bakkt. If the couple success, this could be one of the biggest changes that the cryptocurrency industry has ever seen.
Bringing Crypto to the Masses
Sprecher’s plan to integrate Bitcoin so seamlessly seems to be contrary to what the token’s supporters expect. The “true” supporters of Bitcoin favor a distributed ledger, and do not like the idea of having a major exchange in charge of the investments and payments they take on. In fact, an analyst at Draper associates even says that anything beyond that “contradicts the basic idea of Bitcoin.”
Abhishek Punia, the analyst, continues, saying, “Bitcoin was designed to be decentralized, without intermediaries taking fees. A regulated exchange may be popular for a short period of time, but it’s not the future. The future will be the original idea of a peer-to-peer network.”
Obviously, both Sprecher and Loeffler feel differently, saying that the use of a central infrastructure is necessary, and that ICE is the best exchange for this role. However, the test will be to get banks, asset managers, and endowments involved with Bitcoin enthusiastically.
The target seems to be the bigger institutions, since they will basically draw in the smaller businesses in their fields. Theoretically, Bitcoin could thrive, based on the interest of millions of ICE’s current and potential investors, but it will need to be modified to suit mutual funds and ETF’s.
Millennials are a major target for ICE, since they are the perfect candidate for investing in cryptocurrency. The rise and fall of the stock market are turn-offs for their financial ambitions, but the use of technology in cryptocurrency is more their speed and style. Adapting Bitcoin to long-term investment opportunities could be the solution to bring in their attention.
According to Sprecher, “Millennials don’t trust traditional financial institutions. To gain their trust, banks, brokerages, and asset managers can use a currency that millennials believe in, like Bitcoin. Using digital currencies brings a lot of sizzle.”
Unfortunately, due to the lack of “good market structure,” Sprecher says that they have been unable to truly get involved with asset managers that are as big as Fidelity and Vanguard.
“Even for Bitcoin, different markets are posting lots of different prices. And you can pay an up to 6% spread to exchange dollars for Bitcoin, meaning Bitcoin needs to rise by as much 6% before you break even,” said Sprecher. Furthermore, many anti-crypto consumers believe that the industry can only give them profit “by elicit means.”
Sprecher and Loeffler are under the belief that interested consumers are out there, but they have not found the products that would best serve them. In response, ICE is creating an ecosystem that bonds traditional protection in the financial industry with the widespread benefits of Bitcoin. The only things left to take care of are “trading on an official exchange and safe storage for digital currencies on an institutional scale, “ according to Sprecher.
Making Bitcoin Mainstream
The big roadblock to make Bitcoin into a mainstream option for investors within ICE’s companies is the slow speed, which is the result of overloading the blockchain. The blockchain records every single transaction on nodes, which are validated when proven legitimate. Everything has to be broadcasted to the noted, which means that only seven transactions a second can be posted. At a global scale, this speed cannot handle the traffic.
Bakkt aims to solve this problem with a few changes to the architecture. Rather than having everything go through the blockchain, a transaction that involves a purchase of Bitcoin between two parties would be processed as a trade on the ICE exchange, which means the Bitcoin supply at ICE remains the same. Bakkt keeps the ledger, and there is no need to broadcast to the blockchain. The only posted transactions will be payments that go in or out of Bakkt’s warehouse.
Loeffler describes the process like this: “Our system would operate on a layer above the blockchain, and we’d keep our own omnibus ledger apart from the blockchain.” Essentially, they would function like the lightning network that is already in effect. With that change, Bitcoin has enough liquidity to be considered an official currency.
What’s In It for Banks?
Banks make the most money with interest fees on credit cards, even though they perform so many other transactions that should make more money. However, if the banks decide to cooperate with Bakkt, there could be other opportunities for borrowing money, which means more ways to make revenue. When in the financial industry, the bottom line is always about the financial gains a company could make, and big banks stand to be highly lucrative with the right cooperation.
Though so many aspects of this change are in the works, it will be up to the big banks in the industry and the power of ICE to kickstart Bitcoin into the future. It is only then that cryptocurrency will reach its potential and finally be a mainstream method of trading.