Cinthia Murphy, Managing Editor, ETF.com
The Securities and Exchange Commission has a new ETF proposal to mull over: a physically backed bitcoin ETF.
VanEck, in partnership with fintech company SolidX, is back at it again, trying to be first to market with a physical bitcoin fund, putting in registration the VanEck SolidX Bitcoin Trust (XBTC).
Remember that it wasn’t all that long ago the SEC basically said “not yet” to various ETF issuers planning bitcoin strategies, cooling down what was becoming a heated race last year to be first to market with a bitcoin fund. SolidX itself had its application for a physical bitcoin ETF rejected by the SEC in March 2017, and VanEck pulled the plug on its plan for a futures-based bitcoin ETF this past January.
According to SolidX CEO Dan Gallancy, what’s crucially different this time around versus their previous efforts in this space is the index underlying the ETF.
“Last year, the SEC rejected our application, and the main context behind that rejection was the fact that they had concerns about market structure and the potential for price manipulation in the underlying bitcoin market,” Gallancy said in an interview.
“What the folks at VanEck have done, through their index division, is put together an index of over-the-counter bitcoin trading desks,” he added. “This is not electronic trading, this is voice trading, and therefore, inherently, less susceptible to the type of tomfoolery that the SEC was concerned with.”
Also notable in this filing is the much-talked-about price tag for the fund. XBTC shares are expected to cost around $200,000—a deliberately high sticker price meant to help the SEC’s investor protection efforts by keeping retail investors largely at bay at first.
Well-known ETF veteran John Hyland, who is now global head of exchange-traded products for Bitwise Asset Management, says SEC approval for bitcoin ETFs will come “sooner rather than later.”
Hyland, who’s best known for his time as CIO of United States Commodity Funds, where he helped bring to market the first oil and commodity ETFs, says that several factors should help the SEC feel more comfortable with the idea of crypto ETFs. Among them, an evolving landscape for crypto asset custody; enhanced regulated trading; reliable third-party pricing; and Europe’s thus-far-successful experience with live crypto ETFs.
That said, approval of a bitcoin ETF will either come very soon, or not until 2019, Hyland says.
“I think we get them sooner rather than later,” Hyland said in an interview. “But I also think that if we don't see any action by the SEC in the next two months, we’ll jump to 2019 and beyond. I don't see the SEC going from red light to green light anytime near the midterm election. It’ll make them gun-shy.”
Either way, to bitcoin enthusiasts everywhere, the race to the bitcoin ETFs is back on.
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