JP Morgan, and specifically Jamie Dimon, has been anti-crypto and anti-Bitcoin for over a year. Mr. Dimon has even gone so far as to say that Bitcoin is a bubble, a fraud, and not worth his commentary. But actions speak louder than words. And the institutional on-ramp that Bakkt is providing every Tier 1 financial institution is proving to win over the lieutenants at JP Morgan charged with satisfying clients that are demanding access to the digital asset.
We spoke to two staffers at the firms’ global headquarters who have been working on the relationship between Bakkt and JP Morgan. Let’s just say they didn’t disappoint and their comments just may represent how every global investment bank is planning to engage with Bakkt.
The first source, who has worked at JP Morgan for more than a decade said the following:
“Bakkt provides a clear and clean regulatory construct to engage with Bitcoin. No smoke and mirrors. No regulatory risk. No outsized legal risk. Our compliance and legal team have done a deep dive on Bakkt and our integration/execution protocols. It all works and it all works better than what we expected. The custody solution is the real story there and is ultimately what has provided us the bandwidth (legally) to offer options to clients. If I was forced to disclose where we are headed, take a look at the products that Goldman has become comfortable with and that is what we seem to be comfortable with at this time. Not confirming any product or offering, but I can speculate that we will have a trading desk and that clients will be able to access Bitcoin, via Bakkt, in some way shape or form.”
A second source, new to JP Morgan via a competitor late last year made similar comments:
“There are two digital asset teams internally and the focus has been on what Bakkt has proposed and how to adequately leverage it for institutional clients. I think we are a long way from offering anything to retail clients. That would clearly be in direct competition to Jamie’s (Dimon) public statements. But Bakkt offers an easy pathway to offer institutional clients access that gives us legal and risk comfort. My very educated guess is that we offer trading capabilities within our commodities and forex space that includes Bitcoin via Bakkt. Given that all of the legal and compliance due diligence is all but done, we should see volumes begin and increase here (with respect to Bitcoin trading) as Bakkt ramps up. Where products and services go in the digital asset space from there will take on a life of its own. You can imagine that we aren’t necessarily considered ‘first movers’ in banking. But that’s because we don’t have to be. Still, our leadership likes Bakkt and are comfortable with what they are set to bring to market.”
These comments square with several other conversations connected to competing firms like Goldman Sachs, Morgan Stanley, Barclays, etc. All firms that have immense and robust commodities trading operations and annual trade volumes on ICE’s (Intercontinental Exchange and the NYSE) vast exchange network. As Bakkt attaches itself to an institutional network that has long-standing and trusted infrastructure it makes the digital asset (specific to Bitcoin at the moment) conversation much, much easier for the biggest financial institutions.
Derivatives, NDF’s (non-deliverable forward), futures, ETF’s, and every manner of structured product that is to follow will essentially start with the launch of Bakkt via ICE. That is the narrative among the banking and digital asset Illuminati.
Just do a google search on Bakkt and begin counting the institutions and banking luminaries that are either direct equity holders in the firm or publicly claiming it’s coming utility connected to Bitcoin adoption within mainstream finance.
Any and all crypto hedge funds, family offices, and those ‘of means’ are privately pointing to the December Bakkt launch as the beginning of the next leg up in crypto.
Look at these quotes as a backdrop:
“Here is what you should know. Every single serious crypto investor, personality, institution, and hedge fund is talking about Bakkt. Almost exclusively. They don’t care about a Bitcoin ETF. They care about the Bakkt launch in November and the enormous volume of trading that will ensue connected to the penultimate digital asset across the globe.”
**A reminder of what Bakkt is and what it will actually launch in November of this year, via Forbes’ excellent article in early August: “Bakkt plans to offer a full package combining a major CFTC-regulated exchange with CFTC-regulated clearing and custody, pending the approval from the commission and other regulators. Bakkt will provide access to a new Bitcoin trading platform on the ICE Futures U.S. exchange. And it will also offer full warehousing services, a business that ICE doesn’t have. “Bakkt’s revenue will come from two sources,” says Loeffler, “the trading fees on the ICE Futures U.S. exchange, and warehouse fees paid by the customers that buy Bitcoin and store with Bakkt.”
“Step back and consider what you just read. A CFTC-regulated exchange, clearing, and custody. Some have often called Bitcoin ‘digital gold’. The infrastructure that Bakkt has built and is set to unleash takes the term ‘digital gold’ and makes it a reality.”
And a reminder that Bakkt is officially launching on December 12 (just 43 days away):
“It all begins on December 12, 2018. And as the firm and exchange quickly spool up their partners will become more and more visible. For example, Bakkt has partnered with Starbucks to process payments via Bitcoin on the coffee company’s mobile app. You may be interested in this fact: Starbucks occupies the largest mobile app payments ecosystem in the United States. Bigger than Apple Pay, Google Pay, and Samsung Pay – with 23.4 million users.”
To sum it up, and to give color to why a famously anti-crypto firm like JP Morgan is making friends with Bakkt, the profits associated with exploding trading volumes in a new asset class is the only language that matters in finance. Even the most conservative of firms won’t stay away from a golden opportunity to make money.
Such is the story of Bakkt and JP Morgan becoming BFF’s.