The VanEck SolidX bitcoin exchange-traded fund (ETF) proposal filed in conjunction with the Chicago Board Options Exchange (Cboe), which was submitted to the US Securities and Exchange Commission (SEC) on January 30, was today published in the Federal Register. The SEC now has 45 days to deny or approve the proposal or request a 90-day extension if more review is needed.
The proposal, which requests the same rule change as previously filed proposals, would allow for the buying and trading of SolidX bitcoin shares issued and held by VanEck SolidX Bitcoin Trust. If approved, the shares will be listed on the Cboe BZX exchange for US equities.
Each share purchased by investors would represent a "fractional undivided beneficial interest in the Trust's net assets" and be worth about 25 bitcoin. Only wealthy investors, then, will get a chance to dip their feet into this particular asset pool.
The VanEck SolidX proposal is not the only bitcoin-backed ETF proposal up for review by the SEC. On January 10, San Francisco-based crypto-asset fund provider Bitwise Asset Management filed an initial registration statement with the SEC to request the approval of a bitcoin-backed ETF. That proposal was published in the Federal Register on February 15. Although these proposals both request a change to the same rule, there are some minor differences.
The Bitwise ETF will value the price of bitcoin by monitoring its price on other cryptocurrency exchanges. By contrast, the VanEck SolidX ETF Trust will calculate bitcoin value using the MVBTCO index which "represents the value of one bitcoin in U.S. dollars at any point in time based on executable bids and asks derived from constituent bitcoin OTC [over-the-counter] platforms."
The two companies' approaches to storing funds diverge more sharply. According to today's filing, the assets related to the VanEck SolidX ETF will be held directly by the VanEck SolidX Trust. In contrast, Bitwise will employ the services of a third-party custodian to hold and manage its bitcoin reserves.
Speaking with ETHNews, SEC Commissioner Hester Peirce addressed the SEC's role in the tech space and the importance of a crypto-backed ETF:
"What is important is for the SEC to allow products to trade that meet the requirements of the legal framework. A crypto-backed ETF could facilitate greater institutional participation in the crypto markets while also facilitating retail participation in crypto. If we do approve one or more of these products, the market will have the opportunity to issue its judgment on their benefits and value. We should fulfill our role, which is a limited one, and allow the market to fulfill its role."
How does a crypto-backed ETF work? It is similar to a traditional ETF in that its price is tied to the value of a group of assets. However, instead of tracking a physical commodity such as gold or oil, a bitcoin ETF derives its share value from the price of bitcoin.
These proposals for crypto-backed ETFs may not seem all that exciting to those outside the crypto-space, but the listing of cryptocurrency on a major stock exchange would bring it one step closer to mainstream adoption, giving investors wary of crypto a safer way to experiment with it.
The SEC has thus far proved unwilling to approve crypto ETF proposals. In July 2018, the regulating body denied a proposal for a bitcoin ETF presented by Cameron and Tyler Winklevoss, though not all SEC commissioners agreed with this decision. In August 2018, staff members rejected nine different crypto-backed ETF proposals.
SEC Commissioner Hester Peirce warned in December that the wait may be long:
"Don't hold your breath. I do caution people to not live or die on when a crypto or bitcoin ETF gets approved. You all know that I am working on trying to convince my colleagues to have a bit more of an open mind when it comes to [crypto]. I am not as charming as some other people."
Despite her cautious stance on the passing of a crypto-backed ETF, Commissioner Peirce is still focused on providing help and guidance to those working in the industry:
"I continue to want to work with people engaged in the space to think about what guidance is necessary to give people the comfort to work on crypto projects in the United States and whether any adjustments, such as a safe harbor, need to be made to accommodate unique features of this asset class."
VanEck was unavailable for comment by press time.
This article was updated with quotes from SEC Commissioner Hester Peirce.