ICE-owned crypto startup Bakkt gets Li Ka-shing on board

January 08, 2019 12:21
Hong Kong billionaire Li Ka-shing boosts his bitcoin investments with his participation in the funding round for cryptocurrency venture Bakkt. Photo: Reuters

Hong Kong billionaire Li Ka-shing has joined other tech and venture capital heavyweights in supporting cryptocurrency venture Bakkt in its first funding round.

The startup, backed by Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), has just raised US$182.5 million in its series A funding round.

Investors included ICE, Boston Consulting Group, Microsoft’s venture capital arm M12, Naspers’ fintech company PayU, and Li Ka-shing's Horizons Ventures.

This, in fact, is Horizons Ventures' third investment in blockchain-focused startups, after investing in bitcoin payment processor BitPay in 2013 and blockchain technology provider Blockstream in 2016.

Specializing in early- and late-stage investments, Horizons Ventures has been building a diverse tech portfolio ranging from wearables to food innovation.

Also joining the Bakkt fundraising were CMT Digital, Eagle Seven, Galaxy Digital, Goldfinch Partners, Alan Howard, Pantera Capital, and Protocol Ventures, said Bakkt chief executive Kelly Loeffler.

ICE, operator of 23 leading global exchanges, plans to launch a futures contract with institutional-grade custody arrangements that will be traded on Bakkt’s digital assets platform.

The physically delivered bitcoin futures contract will be warehoused and cleared through ICE’s US-based futures exchange and clearinghouse, distinct from those currently offered on rival exchanges CME and CBOE, which are ultimately settled in fiat currency.

In the case of the Bakkt product, traders will receive a payout in bitcoin at the end of the contract's lifespan, that is, if the trader is on the winning side of the bet. 

The startup plans to attract mainstream and institutional investors in the crypto field in a bid to help the market for digital assets mature. 

The aim is to tame the wild volatility of cryptocurrencies, which are struggling to serve as viable forms of payment in the world of commerce. 

Bakkt’s crypto plans do not end with its bitcoin futures contract. When the startup launched in August last year, ICE announced partnerships with global commerce brands including tech giant Microsoft and global coffee chain Starbucks. 

Starbucks will work with Bakkt to enable customers to convert digital assets into fiat currencies and use cryptocurrencies at its coffee shops. 

Bakkt also plans to leverage Microsoft’s cloud computing platform to build a global regulated ecosystem for digital assets that would allow wider adoption of cryptocurrencies by merchants. 

However, not much of Bakkt's plans materialized in 2018 and regulatory hurdles were blamed for the delays. 

The initial launch of the physically delivered bitcoin futures contract was set for November 2018, but the company announced in the same month that it would be moved to Jan. 24 this year, subject to approval by the US Commodity Futures Trading Commission.

“We have filed our applications and the timing for approval is now based on the regulatory review process,” Loeffler said in a Medium blog post.

In mid-December, the Wall Street Journal reported that Bakkt’s physically delivered bitcoin futures contract is “poised for green light” from the authorities, adding that it would provide an updated launch date in early 2019.

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