Two firms, VanEck Associates Corp. and SolidX Partners Inc. have filed a request with the SEC to list a Bitcoin ETP. Unlike other rejected ETF filings with the U.S. Securities and Exchange Commission, this fund would be physically backed with actual Bitcoin holdings, fully insured, and targeted to institutional investors with a minimum share price of approximately $200,000.
In January, the SEC rejected multiple applications for financial products linked to cryptocurrencies. Prior to that, a Bitcoin Trust ETF application submitted by Gemini founders, Tyler and Cameron Winklevoss, which was also rejected. Since then, the USPTO awarded a cryptocurrency ETP settlement patent to the twins, potentially making a stronger case for SEC approval of a future application.
The firms behind the latest ETF filing took a different route. Rather than working to add validity to the technology, VanEck Associates Corp. and SolidX Partners Inc. are approaching approval from the perspective that the SEC is looking to protect retail investors. The $200,000 share price in the VanEck SolidX Bitcoin Trust creates a barrier to entry for non-institutional investors, beyond the current “accredited investor” requirements of an income above $200,000 and/or a net worth of over $1 million. They are also basing prices off of regulated trading firms, according to the SolidX CEO, Daniel H. Gallancy. In an interview with Bloomberg, Gallancy said, “Based on various comments, it seems that regulators are concerned right now about having an ETF that is available to retail investors. We think that will change over time, but right now a good place to start is with a product geared purely toward institutional investors.”
In 2017, CME Group and Cboe listed Bitcoin futures a week apart. Trading volume continues to increase on those platforms, with Cboe Bitcoin futures breaking a new record in trading volume this past April. The expectation since then was that the SEC would begin approving more financial instruments, including ETFs. However, volatility, lack of depth and uncertain regulations created a bottleneck in the approval process.
In addition to raising the bar for the approval of ETF investors into the proposed platform, SolidX and VanEck plan to base the fund’s price on an index that is to be compiled by a subsidiary of VanEck, MVIS which will track institutional trades that are regulated by the US CFTC.
VanEck manages $45 billion in assets, and over 70 exchange-traded products. The company serves institutional investors, financial advisors and individual investors. It claims to have a history of identifying trends that are likely to create meaningful investment opportunities. Throughout their history, they have included investments such as gold in 1968, emerging markets in 1993 and ETFs in 2006. Bitcoin ETFs would be their latest product, if approved.
SolidX is a fintech software developer with products that include cryptography software and capital markets products. Among the company’s blockchain and distributed ledger technology capabilities are the development of data storage architecture, smart contracts and methods to transfer value through cryptocurrencies such as Bitcoin. They tout their capabilities surrounding blockchain technology as “Certainty-as-a-Service” or CaaS.
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