ICE-Backed Bakkt Builds Institutional Bitcoin Infrastructure With BNY Mellon Custody Partnership
As September 2019 began, the cryptocurrency market was watching one company more closely than any other: Bakkt. Backed by Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, Bakkt was assembling the kind of institutional infrastructure that Bitcoin had never seen before. With CFTC approval secured on August 16 and a September 23 launch date set, the pieces were falling into place for physically-settled Bitcoin futures — and the partnerships behind the scenes were just as important as the product itself.
TL;DR
- Bakkt secured CFTC approval on August 16, 2019, for physically-delivered Bitcoin futures
- Partnership with BNY Mellon provides institutional-grade private key storage
- Bakkt Trust Company became a qualified custodian approved by NYDFS
- Company committed $35 million to clearing risk hedging
- Physically-settled futures launch confirmed for September 23 on ICE Futures U.S.
The BNY Mellon Connection: Why Custody Matters
When Bakkt announced its partnership with BNY Mellon, one of the oldest and largest custodian banks in the world, it sent a clear signal to institutional investors. The arrangement provided geographically-distributed storage of the private keys securing Bakkt’s Bitcoin holdings, leveraging BNY Mellon’s decades of experience safeguarding trillions of dollars in traditional assets.
This was not a minor detail. The primary reason Bakkt’s application had languished at the CFTC for months was the custody question. Physically-settled futures meant actual Bitcoin would need to be stored securely, and regulators were deeply concerned about the risks of theft, loss, and market manipulation that had plagued cryptocurrency exchanges. By bringing in BNY Mellon, Bakkt was telling regulators and institutions alike that Bitcoin custody could meet Wall Street standards.
Earlier in 2019, Bakkt had also acquired Digital Asset Custody Company (DACC), a specialist in institutional cryptocurrency custody. Combined with the NYDFS approval to create Bakkt Trust Company as a qualified custodian, the company had built a three-layer custody framework that was unprecedented in the crypto industry.
The $35 Million Skin in the Game
Bakkt didn’t just rely on partnerships and regulatory approvals to build trust. The company committed $35 million of its own capital to clearing risk hedging arrangements. CEO Kelly Loeffler described this as putting “our own skin in the game,” aligning Bakkt’s financial interests with the integrity and safety of the market.
The commitment was notable because it addressed one of the CFTC’s core concerns: what happens when things go wrong? In traditional derivatives markets, clearinghouses maintain default funds and insurance arrangements. Bakkt’s contribution signaled that the company understood these expectations and was willing to back its product with real capital.
ICE Clear U.S.: Wall Street-Grade Clearing for Bitcoin
Perhaps the most overlooked aspect of Bakkt’s architecture was its clearing arrangement. The Bitcoin futures contracts would be cleared through ICE Clear U.S., the same clearinghouse that handled NYSE trades. This meant initial margin collection, variation margin calls, and risk management were all operating under the same infrastructure that protected traditional financial markets.
For institutional investors sitting on the fence about Bitcoin, this was the kind of infrastructure that made the difference. They didn’t need to trust a crypto-native exchange or understand hot wallet versus cold storage — they could interact with Bitcoin through the same clearing and settlement systems they’d used for decades.
The Market Context
Bitcoin was trading around $9,629 to $9,757 on September 1, 2019, based on data from Kraken and CoinMarketCap. The price represented a significant retreat from the June 2019 peak near $13,800 but was still dramatically higher than the sub-$4,000 levels seen in early 2019. Ethereum held steady near $170-$171, while Litecoin showed strength with a 5.81% daily gain to $66.34.
The broader cryptocurrency market capitalization stood at approximately $230 billion, according to CoinMarketCap’s historical snapshot. XRP was the third-largest cryptocurrency at $0.2581, followed by Bitcoin Cash at $282.33 and Litecoin at $66.14. Tether (USDT) was rapidly growing, with a market cap of approximately $4 billion and 24-hour trading volume exceeding $13.6 billion — a sign of the increasing role stablecoins played in crypto trading.
Competitor LedgerX had been pursuing its own physically-delivered Bitcoin futures but faced regulatory uncertainty, with the CFTC stating it still lacked full approval. This gave Bakkt a clear first-mover advantage in what many expected to become a significant market segment.
Why This Matters
The infrastructure Bakkt was building in September 2019 represented a fundamental shift in how Bitcoin integrated with traditional finance. Physically-settled futures meant institutional capital would flow directly into Bitcoin itself — not just into price-referencing contracts. The BNY Mellon partnership, ICE Clear U.S. clearing, and qualified custodian status collectively addressed nearly every objection institutional investors had raised about entering the cryptocurrency market.
While the September 23 launch would ultimately underwhelm in terms of initial trading volume, the infrastructure Bakkt built became the foundation for the institutional Bitcoin adoption that would accelerate in 2020 and beyond. The qualified custodian model, in particular, would prove influential as more traditional financial institutions sought regulated pathways into digital asset custody.
Disclaimer: This article was written for BitcoinsNews.com as part of our historical archive. Price data and market conditions reflect the date of publication. This content should not be considered financial advice.