VanEck, a New York based asset manager, has announced it will partner with SolidX to list a “physically-backed bitcoin ETF” (exchange traded fund). The proposed ETF will be insured against loss or theft of bitcoin.
VanEck was first to file for a 40-Act Bitcoin ETF and SolidX was among the first for a physically-backed bitcoin ETF. Regulatory approval has been slow in coming though, as the Securities and Exchange Commission (SEC) has been cautious in moving forward with crypto ETFs.
The SEC asked companies to pull about a dozen applications for cryptocurrency-linked products in January, and last year rejected the Winklevoss Bitcoin Trust ETF. SolidX and VanEck were among the companies who had filed to list funds. They hope to have addressed regulators’ concerns with changes they made in the new, joint request by increasing the share price and basing prices off regulated trading firms, according to SolidX Chief Executive Officer Daniel H. Gallancy.
Dalia Blass, Director Division of Investment Management at the SEC, stated in a public letter;
“Recently, the growth in cryptocurrencies and cryptocurrency-related products has attracted significant attention, and we have seen interest among sponsors in offering registered funds that would hold these new digital products. As we have in the past, the Division stands ready to engage in dialogue with sponsors regarding the potential development of these funds. We believe, however, that there are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.”
VanEck and SolidX were amongst those to have a proposal rejected in January. However, according to today’s filing, the two firms have returned to the drawing board in an effort to directly address the concerns of the financial regulators. The CEO of SolidX, Daniel Gallancy, told Bloomberg via a telephone interview:
“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.”
These “issues” included questions on valuation, liquidity, the potential for manipulation and more. In April, the CBOE countered the SEC’s concerns in another public letter saying;
“… we believe that the vast majority of these concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation. As the cryptocurrency markets and infrastructure continue to grow and mature, especially in the spot markets and regulated cryptocurrency derivatives markets, the more easily they will fit within this existing framework.”
VanEck is a New York-based money management firm. They are in charge of over $45 billion in assets and have dealt with many exchange-traded products since their formation in 1955. Meanwhile, SolidX are also working out of New York city. They specialise in fintech and have developed cryptographic software as well as capital markets products. Clearly, this combination of firms makes them well suited to creating the first Bitcoin ETF. Also, both firms reportedly own Bitcoin themselves.