SEC Mulls Unconventional Bitcoin ETF Application

VanEck, SolidX Partner to Create Physically-Backed Bitcoin ETF

This development came in response to a proposal, submitted by Chicago-based derivatives exchange CBOE, to list and trade shares of SolidX Bitcoin Shares, which itself has been issued by the VanEck SolidX Bitcoin Trust.

CBOE was the first US exchange to list bitcoin futures products, and executives have indicated that they intend for the platform to continue to lead in the nascent cryptocurrency derivatives industry.

According to the filing documents, the trust will invest directly in physical bitcoin — not bitcoin futures — and each share will “represent a fractional undivided beneficial interest in the trust’s net assets.”

More from the filing:

“The Trust intends to achieve this objective by investing substantially all of its assets in bitcoin traded primarily in the over-the-counter (“OTC”) markets, though the Trust may also invest in bitcoin traded on domestic and international bitcoin exchanges, depending on liquidity and otherwise at the Trust’s discretion. The Trust is not actively managed. It does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of bitcoin.”

Thus, SolidX Bitcoin Shares will be a very similar product to the Bitcoin Investment Trust (OTC: GBTC), a creation of Grayscale Investments and the most popular bitcoin investment product wrapped in a traditional financial instrument. GBTC is currently traded over-the-counter (OTC), which makes it far less liquid than if it was listed on an SEC-regulated exchange.

Fund Seeks to Target High Net-Worth Investors in Bid for SEC Approval

This bitcoin ETF proposal is targeting wealthy investors in response to SEC concerns over marketing such products to retail buyers.

As CCN reported, the SEC has raised significant concerns about giving a bitcoin ETF its stamp of approval, largely due to the fact that this will make this volatile, high-risk investment product much more accessible to retail investors.

However, this fund — VanEck’s third attempt to create and list a bitcoin ETF — has attempted to evade those concerns by making shares too expensive for most retail investors to purchase. As of the date of the registration statement, each share represented approximately 25 bitcoins, worth roughly $150,000 at the time of writing.

That’s not the only difference between this fund and other proposed bitcoin ETFs. Given regulatory concerns about the integrity of cryptocurrency spot markets, most bitcoin ETF proposals stated that the funds would instead trade bitcoin futures, which are regulated by the Commodity Futures Trading Commission (CFTC). SolidX Bitcoin Shares, in contrast, will hold bitcoin directly — or at least through a custodian.

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