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A Bitcoin ETF Arrives, But You've Got To Be A Pro To Use It

September 4, 2019 7:18 am
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A Bitcoin ETF Arrives, But You've Got To Be A Pro To Use It

About 15 months after VanEck and SolidX revealed plans for the VanEck SolidX Bitcoin Trust ETF (XBTC), the bitcoin exchange traded fund dedicated to institutional investors will launch later this week, potentially paving the way for more cryptocurrency-related funds.

What Happened

VanEck (a major ETF sponsor) and SolidX (a fintech company with exposure to digital assets) filed plans for the fund in June 2018, but as has been the case with rival efforts, U.S. regulators consistently pushed back approval and decision dates, dragging the process out and forcing some market observers to wonder if a bitcoin ETF would ever become a reality.

That reality arrives later this week, but crypto fans should temper their enthusiasm because XBTC will only be available to professional investors.

Why It's Important

“The shares will provide institutional investors access to a physically-backed bitcoin product that is tradeable through traditional and prime brokerage accounts,” said VanEck in a statement. “The Shares are the first institutional-quality, cleared product providing exposure to bitcoin and enabling a standard ETF creation-and-redemption process.”

XBTC will be sponsored by SolidX while VanEck will market the fund. BNY of Mellon will be the custodian bank behind the fund, running its creation-and-redemption process. In the statement, SolidX and VanEck indicate they're continuing an effort to launch a bitcoin ETF that will be open to a broader range of investors, an idea that the Securities and Exchange Commission (SEC) has routinely delayed and rejected.

In the statement, VanEck CEO Jan van Eck acknowledges that institutional demand for a bitcoin fund is an unknown because such a dedicated product for such investors has not existed to this point.

What's clear is that investors like the idea of what the ETF structure can do for bitcoin because the largest digital currency was higher by 3.6% around 5 p.m. ET Tuesday.

What's Next

XBTC will use over-the-counter pricing to enhance transparency. The fund is not registered. Rather, it's being made available under the SEC’s Rule 144A, which allows qualified institutional buyers with potentially shorter time horizons to access products that usually aren't made available to the general public.

When the firms filed plans for XBTC last year, it was expected a single share would price at $200,000 to start, but that figured was not reiterated in Tuesday's statement.

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