New York Stock Exchange parent, Fortune 500 and Fortune Future 50 company Intercontinental Exchange (ICE) announced in August its plans to create a new firm, Bakkt, which intended to utilize Microsoft Cloud solutions to create an open and regulated worldwide ecosystem for digital assets.
The new firm is collaborating with such organizations as Microsoft, BCG, Starbucks and others to develop an integrated platform that allows for institutions and consumers to purchase, sell, store and spend digital assets on a seamless worldwide network.
Federally regulated markets and warehousing along with consumer and merchant apps are expected to make up the Bakkt ecosystem. The first use cases of the ecosystem will be for trading and conversion of bitcoin versus fiat currencies.
Does Starbucks’ involvement in this project mean anything for the digital currency sector? I asked Sheri Kaiserman, 20+ year Wall Street veteran and principal advisor & co-founder at Maco.la, and Jason Davis, former senior UX designer at Wells Fargo and CEO of Hoard, a platform that allows for seamless integration and management of both crypto and fiat currencies. (Thanks to Lauren Epstein and account supervisor Stephanie Rosenblum at PR agency 5W for coordinating).
Kaiserman: “I think it is premature if everyone is thinking that people will start using their crypto to make purchases at Starbucks. First of all, from what I understand, Starbucks’s role in this partnership is more as a consultant to help develop crypto related applications for customers.
Second of all, even if Starbucks did accept crypto as payment, I would not expect many people to pay with it, certainly not in the US, where most of the people who own crypto hold it for speculative purposes.
There are a lot of expensive lessons the community is able to learn from the people who spent their bitcoin in the early days. The first purchase that was made with Bitcoin was for 2 pizzas costing 10,000 bitcoin. I’d be happy to buy someone a cup of coffee for just one tenth of a bitcoin!”
Davis: “The press release issued by Starbucks pertaining to customer purchases using cryptocurrency is nothing more than hype. Starbucks customers are already spending their bitcoin, as well as many other cryptocurrencies, at Starbucks retail locations using crypto-backed Visa debit cards. In fact, digital currency holders are making similar purchases all over the world and have been for years. The most exciting thing we can gleam from the press releases is Starbucks is talking about Bitcoin to the general public. This is a positive direction for the retail sector.
However, what this announcement didn’t emphasize is the corner merchants are still backed into. With every consumer purchase, merchants are beholden to 3 percent transaction fees AND 3 to 5 day settlement times. Cryptocurrencies, and companies like Hoard that support crypto-commerce see a different future. One where merchants aren’t subject to a single medium of exchange backed by a slow and centralized intermediary. Instead, they can transact directly with the counterparty and settle the transaction in seconds without paying exorbitant fees.
Lastly, the partnership with Bakkt and Bakkt’s capabilities are still to be seen. Cryptocurrency companies make many claims yet very few are viable at this time. From what we know, buying Bitcoin through Bakkt consists of a futures contracts. Until that futures contract is converted into real asset ownership, consumers won’t be in full possession of their bitcoin. This is in direct opposition of the original position of the Bitcoin white paper, an electronic peer-to-peer cash system. I’m interested to see how this plays out but I know first-hand far more robust and integrative financial solutions are coming to retail consumers. This deal isn’t it.”
Photos of Davis and Kaiserman – Via 5W
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