VanEck, SolidX to Offer Bitcoin ETF-Like Product to Institutions

3 September 2019

Update (13:15 UTC, Sept. 3 2019): Added details and comment from a press release sent after publication of this article. Further, we’ve clarified that the product is not a true ETF, although similar.

While the U.S. Securities and Exchange Commission (SEC) has so far blocked a number of proposed bitcoin ETFs, two firms aim to launch a more limited option this week.

Announced Tuesday, VanEck Securities and SolidX Management – which have previously had a decision on their proposed bitcoin ETF postponed by the SEC – revealed they are taking an unusual route to bypass the regulatory hurdles. The companies will use an SEC exemption that will allow shares in their VanEck SolidX Bitcoin Trust to be offered to institutions such as hedge funds and banks, but not to retail investors.

Though not in fact a true exchange-traded fund, the product is similar. Ed Lopez, head of ETF product at VanEck, told CoinDesk that the offering “allows for shares to be created and redeemed like ETFs, but it is not an ETF.”

“Unlike an ETF it isn’t 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,” Lopez said.

The shares are to be sold from Thursday under the SEC’s Rule 144A, which allows privately placed securities to be traded among “qualified institutional buyers” with shorter holding periods and without the requirement to register with the SEC.

“The shares will provide institutional investors access to a physically-backed bitcoin product that is tradeable through traditional and prime brokerage accounts,” the firms explained in a press release. “The Shares are the first institutional-quality, cleared product providing exposure to bitcoin and enabling a standard ETF creation-and-redemption process.”

Gabor Gurbacs, director of digital asset strategies at VanEck/MVIS, said;

“We continue to support market structure developments in the digital asset space. This Qualified Institutional Buyers (QIBs) only 144A Bitcoin product may pave the way for institutional Bitcoin adoption and showcase that an appropriately regulated ETF structure can work in practice.”

SolidX is sponsoring the trust, while VanEck is providing “marketing services,” according to the release. Further, BNY Mellon has come onboard as the daily fund accountant, administrator and transfer agent. This includes “facilitating the investor creation and redemption activity.”

Investors are also insured against “the theft or loss” of the bitcoin private keys held by the trust, and are provided open-ended creation and redemption of shares, the firms said.

Daniel H. Gallancy, CEO of SolidX, commented:

“As the first bitcoin product in the U.S. with standard ETF creation and redemption and established clearing and settlement processes, institutional investors can finally gain exposure to bitcoin within a familiar context. We view the product as an exciting next step for SolidX and VanEck in our partnership as we work to bring institutional-quality crypto asset products to the marketplace.”

To date, the SEC has not approved any crypto ETF, although SEC Commissioner Robert Jackson said early in 2019 that he believes an ETF proposal will “eventually” meet the SEC’s standards.

On Aug. 12, the SEC delayed decisions on bitcoin ETF proposals by Bitwise Asset Management, VanEck/SolidX and Wilshire Phoenix, all of which hope to become the first to offer a crypto ETF in the U.S. Those decisions are now scheduled for later this month and in October.

Gabor Gurbacs image via CoinDesk archives