The $182 million effort to bring physically delivered bitcoin futures to Wall Street has officially entered testing.

Bakkt, an affiliate of the New York Stock Exchange (NYSE) parent company Intercontinental Exchange (ICE), soft launched today, July 22, 2019, to give select clients a chance to test its forthcoming bitcoin futures contracts. The first of its kind in regulated bitcoin markets, the derivatives will settle in-kind, paying out traders in bitcoin as opposed to in cash like the CME and Cboe’s own futures.

As its primary investor, ICE’s futures exchange will give Baakt’s product a home and will furnish it with a clearing house. It will also set the prices for its monthly and daily contracts based on internal pricing discovery. Other investors in the project include Mike Novogratz’s Galaxy Digital, Microsoft’s M12 venture arm and Pantera Capital.

“The ‘moonshot bet’ has become a familiar term in business culture,” Bakkt COO Adam White wrote in a blog post, alluding to the 50th anniversary of the Apollo 11 moon landing. “Recently, Jeff Sprecher, the Chairman and CEO of Intercontinental Exchange, in his fourth quarter earnings conference call, termed ICE’s investment in Bakkt ‘a bit of a moonshot bet.’ Practically speaking, however, Bakkt is a very ‘down to earth’ solution to the grounded challenge of building trust in bitcoin and other digital assets for institutions and consumers alike.”

Hired in February 2019, White, formerly the COO of Coinbase, is part of Bakkt’s elusive and sometimes fanciful origin story, which is to say, it’s been a long time coming.

The Long Road to Baakt

The platform made its media debut in August 2018 to much fanfare and its fair share of misconceptions (e.g., that it meant that Starbucks, a partner but not an investor in the product, would accept bitcoin at its brick-and-mortar locations). Initial reports slated Bakkt’s launch for November of the same year, a deadline the team delayed to cut through red tape and to beef up its engineering and management staff.

Baakt’s rollout was initially delayed from November 2018 until December 2018 and then tentatively pushed to January 2019 before the team put its head down to deliver on a more realistic deadline. Even with testing underway, Bakkt is still awaiting regulatory approval for its custody warehouse, which its website states “[leverages] the cybersecurity tools on which the NYSE relies.”

In addition to futures, Bakkt also promises the ability to conduct cryptocurrency payments with its platform. Its bitcoin futures, however, are its main draw and have been eagerly awaited by some in the Bitcoin community as a watershed moment for Bitcoin’s acceptance in institutional investor circles.

“This launch will usher in a new standard for accessing crypto markets,” White claims in his blog post. “Compared to other markets, institutional participation in crypto remains constrained due to limitations like market infrastructure and regulatory certainty. This results in lower trading volumes, liquidity, and price transparency than more established markets … our mission [is] to support the development of trusted infrastructure for securely transacting in the new market for digital assets. In advance of the start of Bakkt’s testing regimen.”

White goes on to list the issues Bakkt believes are impediments to institutional adoption, including regulatory uncertainty, untransparent price discovery, market manipulation, security/self-custody issues and lack of market surveillance sharing, among others.

With its soft-launch underway, Bakkt’s reentry into the conversation of competing institutional-grade bitcoin trading products is timely. Last week, the U.S. Commodity Futures Trading Commission (CFTC) began investigating the widely popular cryptocurrency derivatives exchange BitMEX for U.S. accounts. Unregulated as it is, BitMEX isn’t legally allowed to open its services to U.S. citizens without CFTC approval (for its part, BitMEX has barred U.S. users from the platform since the beginning of this year).

In competition with its regulated and unregulated counterparts alike, market newcomer LedgerX received approval to list and custody its own physically-settled bitcoin futures earlier this year. This platform will be open to retail and institutional investors alike.