September 4, 2019 – VanEck Securities and SolidX Management has a pending proposal to offer Bitcoin-ETFs (Bitcoin Exchange Traded Funds.) As an exchange-traded fund, it will allow more users to put Bitcoin into their portfolio without going into the trouble of setting up wallets, etc. VanEck, SolidX, Bitwise; they are planning to launch Bitcoin ETFs but they are all challenged by the US Securities and Exchange Commission (US SEC).
Bakkt has already acquired a New Yor State Trust Charter, which will allow it to begin offering physically-settled Bitcoin Futures contracts. The product will launch on September 23, 2019.
For VanEck/SolidX ETF, the US SEC is on track to decide by October 18, 2019. Pundits are saying that VanEck/SolidX ETF proposal has more chance of succeeding because of its ties with the CBOE (Chicago Board Options Exchange.)
However, in recent news, VanEck Securities and SolidX Management have found a way to bypass regulatory hurdles. It is revealed that they will use an exemption in the US SEC rules so that they can offer VanEck SolidX Bitcoin Trust to institutions such as hedge funds and banks. Meaning, they will offer it to institutions but not to retail investors.
It is not a Bitcoin-ETF, but similar according to VanEck ETF Product Head Ed Lopez. It is not listed on a national exchange. “rather it is quoted on the OTC Link ATS platform. This is a first-of-its-kind type of offering. Given it will trade over-the-counter via broker-to-broker transactions, we’ve been casually referring to it as a Broker Traded Fund, a BTF,” said Mr. Lopez.
The shares are to be traded among qualified institutional buyers with shorter holding periods and “without the requirement to register with the SEC.” In a press release, the firm said this will provide institutional investors access to physically-backed Bitcoin product that is tradeable through traditional and prime brokerage accounts.” SolidX will sponsor the trust while VanEck will provide marketing services.
So why are these kinds of products being offered if Bitcoin holders and traders are always advised to keep their own wallet and their own private keys? This Broken Trader Fund (and ETF) is more about custody and the east of trading Bitcoin on familiar platforms. Institutional investors are familiar with OTCs, Exchanges, etc. A user on Reddit sums it up:
“This is really to make it easier for groups to invest using their existing tools and no need to worry about taking custody of the crypto. I can understand why they’d want this, many just want a small hedge in crypto as long as they don’t have to work too hard to purchase and hold it.”
Another user said:
“ETFs are a vehicle that allows for pretty much anything to be traded on an exchange. Index tracking ETFs are a popular investment, but they’re only one of the many things that the ETF mechanism can be used for.”
It is important to note, however, that what VanEck is launching here is not ETF. As mentioned by Economix Alex Kruger on Twitter:
“Van Eck, maybe tired of waiting for the SEC to approve a bitcoin ETF, are launching their version of Grayscale’s Bitcoin Investment Trust, which is a trust that holds bitcoin and trades in US OTC Markets under ticker $GBTC.”
This article is first published on BitPinas: What is the Significance of VanEck Starting to Offer Bitcoin ETF-Like Products to Institutions?