New Acquisition Opens Trillion-Dollar Market for Bakkt

Speaking during Intercontinental Exchange’s Q4 earnings call Thursday, Jeffrey Sprecher said the company’s pending acquisition of Bridge2 Solutions, which will ultimately be acquired by the bitcoin warehouse, “will accelerate the second phase of our digital asset strategy.”

Bakkt’s acquisition of a loyalty rewards company will “expand Bakkt’s presence across an asset class that today spans over $1 trillion in value”, its parent company’s CEO said Thursday.

“We began by building a regulated bitcoin custody solution as well as regulated futures and options on bitcoin”, he said. The second phase includes a consumer-focused digital payments app Bakkt first formally announced in October.

“The next big hurdle for the company will be getting that app into consumer hands and we will be looking at consumer adoption more than revenue or expense,” Sprecher said. “Fortunately, that company is not a big drain on us … we have a lot of financial flexibility now from the company given it has a revenue stream both from trading and from operation of all these rewards programs.”

Users will be able to manage and transact with airline miles, hotel points, cryptocurrencies and other assets on a single platform, he said. Bakkt is also looking to digital gaming assets as a potential new aspect.

“We’ll position Bakkt as an aggregator and marketplace for these points,” he said.

Bridge2 already supports 4,500 loyalty and incentive perk programs, Sprecher said, and supports products for seven of the top 10 financial institutions in the U.S.

Sprecher told Fortune Magazine that “the legacy payments infrastructure is ripe for disintermediation.”

He envisioned Bakkt’s app as “a direct payment system” not dependent on services provided by other third parties. “It hit us that making rewards cash-like would be a step in that direction”, he said.

Bakkt anticipates launching the app in the first half of 2020.

The company is also continuing to raise funds and build out its products. In a press release Wednesday, ICE said Bakkt is looking to close a new funding round in the coming days.

During Thursday’s earnings call, ICE CFO Scott Hill said Bakkt was included in a bucket of ICE’s anticipated expenses for the fiscal year, as the company expects to spend $20 to $30 million in technology and operations. This bucket would include ICE Futures and other platforms in addition to Bakkt.

ICE Snaps Up Loyalty Program Provider Bridge2 to Boost Bakkt’s Consumer Play

Intercontinental Exchange (ICE), the bitcoin warehouse’s parent company, announced Wednesday it had agreed to acquire Bridge2 Solutions, a loyalty solution provider for both merchants and consumers. Bakkt, in turn, will use its funds from its ongoing Series B fundraising round to acquire Bridge2 and apply its tools to its consumer app.

In a statement, Bakkt CEO Mike Blandina wrote, “With the launch of the Bakkt app, we will, for the first time, offer consumers a robust platform to consolidate and use all of their digital assets, from crypto to loyalty points to in game tokens, in one user-friendly wallet.”

Bakkt will take advantage of Bridge2’s current relationships with banks and merchants, as well as its “Loyalty Pay solution” to launch products, he said.

The company revealed its intention to build a mobile consumer app in October, when Blandina, then the chief product officer, wrote in a blog post that Bakkt was hoping to “make it easy for consumers to discover and unlock the value of digital assets,” as well as facilitate transactions and tracking.

“Merchants gain access to a broader set of customers with expanded spending power”, Blandina wrote at the time.

The app is likely to support more than just bitcoin, though a specific list of supported assets or other virtual forms of value have not yet been released.

Bakkt previously announced it was targeting a launch date in the first half of 2020.

Bakkt launched last year as an institutional-focused bitcoin warehouse, offering futures and options contracts in conjunction with parent company ICE. Its former CEO, Kelly Loeffler, was appointed to the U.S. Senate by Georgia Governor Brian Kemp, leading to Blandina’s and COO Adam White’s elevations to the CEO and president roles, respectively.

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