VanEck, SolidX and Cboe Continue To Push Bitcoin ETF With Latest SEC Private Meeting
The U.S. securities regulator (SEC) recently met with representatives of two firms behind a bitcoin exchange-traded fund (ETF) proposal before the agency.
According to a memorandum the regulator published on November 28, 2018, a team from VanEck, SolidX, and the Chicago Board Options Exchange (CBOE) held a meeting a team of SEC officials on November 26, 2018.
The meeting focused on the general pricing of commodities like gold and oil, showing the evolution of the Bitcoin’s future market, and explains new pricing methods using newly created prices indices.
The SEC’s delegation was drawn from the agency’s divisions of Corporation Finance, Trading and Markets, Economic and Risk Analysis, as well as from the Office of General Counsel.
VanEck Bitcoin ETF
The crypto community has anticipated that the securities regulator will approve the VanEck bitcoin ETF, even as the commission rejected nine other crypto-backed index funds.
VanEck teamed up with blockchain firm SolidX and applied for approval from SEC for their physically-backed BTC exchange-traded fund. The firm’s product would be listed for investors on Cboe’s BZX Exchange.
The U.S securities regulator looked at the VanEck ETF proposal in August, and instead of approving or disapproving it, the agency postponed its decision to a later date. That has been the case since, with various observers noting that its approval would help bring institutional investors to the burgeoning crypto market.
This is the second meeting in just a few months, with VanEck, SolidX, CBOE and the SEC meeting in early October this year. During this meeting, the applicants discussed how the crypto landscape has matured and how the SEC’s guidelines lack clarify.
The latest discussion centered on Cboe’s BZX and its proposed rule change that seeks to “list and trade shares of the VanEck SolidX Bitcoin Trust,” the SEC said in the memo.
More importantly, the VanEck/SolidX presentation revolved around a comparative assessment of the market, with Bitcoin as an asset being compared to traditional assets like gold, crude oil, and silver. Incidentally, all these assets have ETFs listed for trading in the market.
In their presentation, the crypto team tackled the issue of price formation and discovery across traditional commodities and Bitcoin.
In their analysis, the team argues that like “gold and silver, Bitcoin derives its value from its use as a ‘money substitute.'” They argued that the same couldn’t be said of crude oil, which qualifies as an “industrial commodity.”
The presentation also focused on the futures markets for the three traditional commodities, emphasizing that in all of them, empirical evidence revealed a correlation between their spot and futures prices.
Referring to them as “cointegrated,” the team showed how the spot and futures market prices have a tight correlation, “link” according to the VanEck team.
That, according to the presentation, also applies to the Bitcoin spot and futures market, with the price formation and discovery co-integrated and linked.
As such, the team detailed in their argument is evidence that the “futures markets perform a valuable role in price discovery” and that too is “evidence of a well-functioning capital market.”
Notable too is the team’s argument that Bitcoin is more resistant to potential market manipulation than gold, silver or crude oil, – assets that have ETFs.
While physical commodity assets like gold can suffer manipulation resulting from leaks by “insiders” such as when new sources of supply are discovered or if there are issues at a production site, such situations are generally “inapplicable,” to Bitcoin.
According to the SEC document, the claimants state that the arbitrage process gives Bitcoin advantages over commodities like oil. They added:
“The homogeneity of Bitcoin makes for a uniform worldwide market rather than regional semi-independent markets that result in non-fungibility and market fragmentation.”
Will the SEC budge after this latest meeting? It all depends on the regulator- even as its chair Jay Clayton recently argued that a lot still needs to be done regarding preventing “market manipulation” before an ETF hit the market.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.