SEC Publishes Memorandum From Recent Bitcoin ETF Meeting With VanEck and SolidX
SolidX and VanEck have focused their proposal around section 6(b)(5) of the Securities Exchange Act, which provides criteria for approval as follows:
“ The rules of the exchange are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers. brokers. or dealers, or to regulate by virtue of any authority conferred by this chapter matters not related to the purposes of this chapter or the administration of the exchange.”
“SolidX, VanEck and Cboe believe the Trust and the rule change request are indeed consistent with section 6(b)(5),” the memorandum notes.
SolidX and VanEck put added emphasis on the importance of investor protection and support for public interest in their case to the SEC. Without SEC approval, Bitcoin investors face operational risks of theft, loss or destruction of cryptographic keys, without a solution of insurance. SolidX and VanEck, by contrast, have assembled a $125 million insurance capacity from a syndicate of A-rated underwriters and have made arrangements to further scale the fund’s insurance capacity as it grows.
“An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC,” read the memorandum. “Furthermore, in creations and redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.”
The memorandum concludes with a restatement of the issues in SolidX’s previous application that have since been resolved:
- “There now exists a significant regulated derivatives market for bitcoin
- Relevant markets – Cboe, bitcoin futures, OTC desks – are regulated
- Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs
- Cboe’s rules are designed to surveil for potential manipulation of Trust shares
- The proposed ETF promotes investor protection”
“To the extent necessary, we stand ready to make additional changes to the product structure consistent with Section 6(b )(5) of the Exchange Act to address any concerns of Commission or Staff,” said the applicants.
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