VanEck, SolidX to Pilot Bitcoin Offering to Institutional Investors

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After numerous frustrated attempts to bring a bitcoin exchange-traded fund (ETF) to the wider public, VanEck Securities Corporation and SolidX Management are opting for a trial run with institutional investors to show regulators that the product is viable. 

As reported by The Wall Street Journal, the legacy financial pair plans to open a restricted version of its bitcoin ETF to select institutional and accredited investors starting this Thursday. The unconventional arrangement takes advantage of the U.S. Securities and Exchange Commission’s (SEC) Security’s Act Rule 144A, which lifts “restrictions on trades of privately placed securities so that these investments can be traded among qualified institutional buyers, and with shorter holding periods.” 

Sidley Austin LLP represented SolidX Partners Inc. in this first-of-its-kind Rule 144A offering.

Ed Lopez, the head of ETF products at VanEck, clarified to Bitcoin Magazine that “[t]he 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,” he continued, “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.”

This so-called BTF contract will be settled in physical bitcoin as opposed to cash, which is how the regulated bitcoin futures market currently operates.

Bitcoin ETFs: A Long Journey

Becoming something of a face for the industry’s bitcoin ETF aspirations, VanEck and SolidX have doggedly chased after the SEC’s approval. The SEC has delayed, requested a withdrawal of or outright rejected the duo’s applications multiple times — and rejected individual applications from the firms, as well.

In the several rejected or delayed ETF filings the SEC has reviewed, the agency has cited concerns over market manipulation and bitcoin custody as the primary obstacles to its approval. VanEck/SolidX’s move is ostensibly to allay these fears by testing the waters for a bitcoin ETF on a manageable scale. 

“We continue to build ways to access bitcoin in liquid, insured and regulated forms. The 144A bitcoin product may foster institutional Bitcoin adoption and demonstrate that a product with Bitcoin-ETF-like characteristics can function in practice,” Gabor Gurbacs, director of digital asset strategies at VanEck, told Bitcoin Magazine.

This “practice” for now, of course, is within the realms of institutional investors, who have access to other accredited-only bitcoin on-ramps like Grayscale’s Bitcoin fund, GBTC, or Fidelity’s Digital Asset fund. They also have access to the CME and Cboe bitcoin futures and LedgerX’s swap contracts, though these are also open to retail investors. If VanEck/SolidX’s bitcoin ETF were to ever mature past this pilot phase, retail investors could access it, as well.

Until then, the pending launch to accredited individuals and institutions is, at the very least, a small victory in what has become a years-long campaign toward the industry’s first bitcoin ETF.