Bakkt, a platform for buying, selling, storing and spending digital assets that was launched by Intercontinental Exchange (ICE), has acquired Digital Asset Custody Company (DACC), a firm that specialises in providing custody services for digital assets.
“Think of that [acquisition] as helping us scale our existing offering that we’ve built over the last two years and is really ready to launch. We’ll be working on integrating Digital Asset Custody into our operations and what they bring to us is the ability to scale across a dozen blockchains and a hundred tokens within custody,” said Kelly Loeffler, CEO of Bakkt and a member of ICE’s Executive Management Committee, at a fintech–focused event hosted by the Depository Trust and Clearing Corporation (DTCC) in New York on Tuesday.
Additionally, in an online post announcing the acquisition, Adam White, COO of Bakkt, commented: “DACC shares our security-first mindset and brings extensive experience offering secure, scalable custody solutions to institutional clients. The team’s experience integrating multiple blockchains and operating cutting-edge consensus mechanisms is a valuable addition to our team and future product line.”
On the custody side, Bakkt has also filed with the New York Department of Financial Services (NYDFS) for approval to become a trust company so that it can serve as a Qualified Custodian for digital assets.
Another interesting part of this week’s announcement was that White said that Bakkt was “working closely” with BNY Mellon to offer geographically distributed storage of private keys that would be secured by the bank. This is obviously significant given the existing relationships that BNY Mellon has with many big, institutional clients and the regulatory and operational comfort that such a well-established, highly regulated custodian bank being involved in the custody process might potentially provide to these clients.
At the DTCC event, Loeffler said that the creation and development of Bakkt is part of a longer-term effort by ICE to try and fill a gap that exists for financial institutions looking for a way to get involved in the digital asset space.
“We saw that institutions did not have an on-ramp, if you will, to get into this space. And I don’t just mean not the right technology stack or trading technology, but really the regulatory cover, the clarity about what is crypto and what it means to hold risk in those assets. So we’re starting with building custody, but custody will enable us to do a lot of things, namely launch our futures on ICE futures US, and we’re working with the CFTC on that approval,” she said.
Loeffler continued: “Our futures contract will be physically deliverable into bitcoin. I think what’s unique about this, is that it gives institutions a way to buy this for the first time in a federally regulated market and cleared through a federally regulated clearing house and custodied at a qualified custodian. That really doesn’t exist in that space today.”
Loeffler added that the third area of focus for Bakkt will be in facilitating various use cases for digital assets, with payments being an easy use case to demonstrate.
“We’ve announced that Starbucks is kind of our launch partner and we’re working on building out that infrastructure as well,” she said, referring to the fact that Starbucks was named as a partner firm of Bakkt upon its unveiling in August last year, a fact that has sparked rumours that the coffee chain will begin accepting payments in digital assets such as cryptocurrencies.
In the press release announcing the launch of Bakkt time Maria Smith, vice president, partnerships and payments for Starbucks, commented: “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 US dollars for use at Starbucks.”