trending Market Intelligence /marketintelligence/en/news-insights/trending/qx1MuckuU7jaO3dQl-Qi7g2 content esgSubNav
In This List

1st limited bitcoin ETF set to launch, but only for institutional buyers

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


1st limited bitcoin ETF set to launch, but only for institutional buyers

Two firms are seeking a workaround to launch a bitcoin exchange-traded fund, a product no company has yet managed to secure regulatory approval for.

Van Eck Associates Corp. and SolidX Management LLC intend to start selling shares in a limited version of a cryptocurrency ETF on Sept. 5. The move marks the industry's latest attempt to bring cryptocurrency investment to mainstream investors, though this route only allows shares to be sold to certain institutional buyers.

Cryptocurrencies have grown in popularity and mainstream acceptance, but the nascent marketplace largely remains unregulated. Many market participants viewed the late 2017 introduction of bitcoin futures, a product that allows investors to bet on the digital currency's future price, as having opened the door for a bitcoin ETF. Derivatives such as futures contracts are mostly used by professional traders and institutions, but they are a step toward creating passive investing strategies and ETFs — the investment products that have come to dominate equity markets and retail investors' portfolios. The ease of trading ETFs on stock exchanges could give more investors exposure to bitcoin and raise its profile in the broader economy.

But the SEC has so far rejected every attempt to sell a bitcoin ETF.

In August, Wall Street's top regulator again deferred action on the VanEck SolidX Bitcoin Trust, which the two firms initially applied for in 2018. In previous rejections of bitcoin ETFs, the SEC raised concerns about possible market manipulation and the lack of sufficient fraud protection in the industry. The agency declined to comment on the companies' latest plans.

Van Eck and SolidX intend to sell shares of their bitcoin ETF under the SEC's Rule 144A. That rule exempts the shares from securities registration but allows them to be sold as privately placed securities only to "qualified institutional buyers." That means the ETF would only be available to institutions such as hedge funds, brokers and banks, not to retail investors or individual buyers.

Bank of New York Mellon Corp. will act as the daily fund accountant, administrator and transfer agent, which includes facilitating the investor creation and redemption activity.

It is not clear how much demand there will be for a bitcoin ETF. Investors and traders met the launch of bitcoin futures with a somewhat muted response, and Cboe Global Markets Inc., which was the first U.S. exchange to introduce bitcoin futures, stopped listing additional contracts for trading in March.

"Institutional demand for bitcoin exposure is uncertain because institutional quality vehicles simply have not, to this point, been readily available," Van Eck CEO Jan van Eck said in a statement. "We're introducing a solution for institutions that fits within their operational processes and the current regulatory framework."