Recently, the US Securities and Exchange Commission (SEC) asked again for understanding for an extension of the time limit for regulating Bitcoin ETFs. Now the New York investment company VanEck is taking a different route to launch a Bitcoin ETF. The sale of a Bitcoin ETF to institutional investors began last week.
Table of contents
- Limited ETF for institutional clients
- Bypassing SEC rules
- Misleading name?
- Bakkt crypto exchange starts Bitcoin futures
- SEC chairman Clayton renews criticism
- Clayton sees progress
- Conclusion: VanEck bypasses SEC with ETF for institutional investors
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Limited ETF for institutional clients
The ETF is referred to as "limited version" of the originally planned ETF. VanEck sells certificates of this ETF variant only to institutional investors, e.g. hedge funds, qualified institutional buyers, registered investment advisors or banks. Private investors are excluded from the outset. The ETF may not be sold to them. The provider thus circumvents the requirements of the SEC.
Qualified institutional buyers (QIB) are institutions with a portfolio of securities worth more than $ 100 million or a registered broker who has at least managed ten million dollars. A bank or savings bank that manages or invests at least $ 100 million in securities and has a proven net worth of at least $ 25 million can also be considered a qualified institutional buyer.
Bypass SEC rules
This step is made possible by VanEck through the so-called Rule 144A, an exception in the rules of the SEC. As a rule, securities must first be registered and then approved by the SEC. However, if a company issues securities under Rule 144A, these can only be sold to institutions. In terms of risk assessment, these are better positioned than private investors and therefore require less high investor protection. VanEck is now going this way to be able to launch a Bitcoin ETF on the market for the first time.
The provider calls its new ETF "VanEck ETF Lite" and could also use it as a test for its actually planned Use ETF. Among other things, the SEC has long criticized the lack of security and unreliable price indices, citing these as reasons for the pending approval. If VanEck is now celebrating success with its limited version, this could provide further arguments to convince the SEC to approve the SolidX Bitcoin ETF that is actually planned. The decision about this was last postponed to October 13, 2019.
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The Bloomberg news agency referred to the now coming ETF, in which SolidX is also involved, as a workaround product. After the first media reports, it quickly became clear that the current VanEck product is a limited ETF, but is still a real ETF. However, some observers believe that this term is misleading. Crypto lawyer Jake Chervinsky wrote on Twitter that he sees the term ETF as a marketing strategy, but that the new product is very similar to the Bitcoin Trust Fund (GBTC) of crypto wealth manager Grayscale.
Still share Many experts believe that the new ETF could help support the price recovery of bitcoins. Grayscale's Bitcoin Trust currently comprises over one percent of all Bitcoins. Products that are similar to ETFs, but are traded over the counter, can therefore represent high capital inflows into the crypto market by institutional investors. Grayscale even doubled the investment in its funds in the second quarter of 2019.
Bakkt crypto exchange launches Bitcoin futures
The next interesting crypto product is already in the starting blocks. On September 23, the crypto exchange Bakkt plans to launch physical Bitcoin futures. Two weeks earlier, Bakkt started storing bitcoins for its customers. Bakkt could also be very interesting for institutional investors and further support Bitcoin's price increase.
Especially for institutional investors , the offerings from Bakkt and the new VanEck ETF will increase them Opportunities in Bitcoin trading. There has been significant progress here recently. However, in the eyes of many observers, a Bitcoin ETF is still necessary for everyone. In this way, many small investors can also add bitcoins to their portfolio via a regulated ETF.
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SEC Chairman Clayton renews criticism
Zu At the beginning of the week, however, it became clear that the SEC and its chairman Jay Clayton are still very critical of a Bitcoin ETF. A decision on Wilshire Phoenix's application is pending before the VanEck and SolidX ETF is decided at the end of September.
Hopes of an early approval of a public Bitcoin ETF were dampened at the beginning of the week when Jay Clayton again got away said that there are still some obstacles to be overcome. However, he also said in an interview with CNBC that Bitcoin ETFs are closer to market maturity.
Clayton sees progress
Nevertheless, he reiterated his criticisms of a Bitcoin ETF. The trading in bitcoins continues to be based on unregulated markets that could easily be manipulated. His agency could only consider a Bitcoin ETF if all assets are properly stored. However, Clayton does see progress, especially for institutional investors. However, possible market manipulation continues to worry him. According to Clayton, spot exchanges where many small investors are active are involved in numerous unethical trading practices. Among other things, fake trading volumes would be reported.
Conclusion: VanEck bypasses SEC with ETF for institutional investors
VanEck has been working with SolidX on a Bitcoin ETF for a long time. A decision by the American stock exchange regulator was recently postponed again until mid-October. However, the provider has now found a way so that at least institutional investors can purchase a Bitcoin ETF.
The SEC requirements actually stipulate that securities must first be registered and then approved. However, the Rule 144A is an exception to this rule if a security is only issued to qualified institutional investors. The requirements for investor protection are less strict here.
This means that banks, hedge funds or registered investment advisors have been able to acquire a limited bitcoin ETF from VanEck with the VanEck ETF Lite since last week. VanEck could also use this as a test for its ETF, which is actually planned. If the provider can show success, the SEC could ultimately be persuaded to approve a Bitcoin ETF for retail investors as well.
However, the concerns regarding stock exchange supervision still seem to be great. Jay Clayton, the chairman of the SEC, said in a recent TV interview that the proposed ETFs are now closer to market maturity and recognizes progress particularly for institutional investors, but with regard to the unregulated market and the danger of manipulation, the SEC sticks to its reasoning. At the end of September, the next decision by the stock exchange supervisory authority on a submitted ETF is pending.
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