For the Sake of 'Market Integrity,' Bakkt Won't Offer Bitcoin Futures Margin Trading

Many have forewarned corruption as the titans of finance more toward institutionalized cryptocurrency, eyeing every new futures contract as a potential to return to the banking practices Bitcoin was created to rise above.

One institution resisting the trend is Baakt, which revealed that it will not support margin trading for its upcoming Bitcoin contract.

Bakkt, the child company of NYSE-operator InterContinental Exchange, unveiled plans in August to "One day" launch physically delivered Bitcoin contracts as part of its open, global ecosystem for digital assets.

Now, Bakkt CEO Kelly Loeffler has released a post on Medium, seemingly to pacify those who raise eyebrows at the thought of a Bitcoin futures market.

It can be argued that Bitcoin margin trading-which allows an investor to borrow funds from their brokerage-may encourage exchanges to lend beyond their holdings and, in essence, operate not so unlike the fractional reserve banks that catalyzed Bitcoin's creation.

Titled "An Evolving Market," Loeffler's post maintains that Bakkt will avoid such practices by fully backing all contracts with Bitcoin.

"Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage or serve to create a paper claim on a real asset."

According to the chief executive, Bakkt's "Physical delivery" of Bitcoin will make it unlike existing cash-settled futures contracts such as CME-which the U.S. Federal Reserve attributed to Bitcoin's "Rapid run-up and subsequent fall in price" in December 2017.

Some remain unconvinced that an institutionalized and unadulterated Bitcoin market is possible.

In the not too distant future after ETF's are approved, there will 40-60 Billion claims on the 18 Billion or so Bitcoins at the time.