VanEck and SolidX will use an exemption in order to offer bitcoin ETFs to institutions, hedge funds and banks, but without offering them to retail investors.
This will circumvent the need for the SEC’s approval and allow them to market their bitcoin ETFs without obtaining the long-awaited approval.
The Wall Street Journal reports that Van Eck Securities Corp. and SolidX Management LLC are planning to start selling limited edition shares of their Exchange-Traded Fund (ETF), the VanEck SolidX Bitcoin Trust, next Thursday, using a rule that exempts them from the need to register securities, the 144A rule, although it does restrict the sale to certain institutional buyers.
Up to now, all the requests for approval of bitcoin-based ETFs submitted to the SEC have been rejected or postponed, with the result that there is still no bitcoin-based ETF on the American market.
However, since the main potential customers of these financial instruments are precisely institutional investors, VanEck and SolidX will finally be able to sell their bitcoin ETFs on the market and bypass the SEC’s hesitations in this regard.
In fact, SEC Rule 144A allows privately placed securities to be traded between “qualified institutional buyers”, with short holding periods and without the obligation to register with the SEC.
In particular, this rule amends the SEC’s restrictions on the trading of privately placed securities in such a way that these investments can be traded between qualified institutional buyers and with shorter holding periods of six months or one year, rather than the usual two-year period.
Before a security can be offered to the general public, the Securities Act of 1933 stipulates that the issuer must register it with the SEC, but Rule 144A allows privately placed securities to be sold without registration with the SEC.
Institutional investors do not usually need the same levels of information and protection as ordinary investors, so there is no need for special safeguards such as those that the SEC requires from anyone who wants to issue bitcoin ETFs for retail placement.
Therefore, from Thursday, on the American market, the now notorious bitcoin ETFs will finally be available, albeit only for large institutional investors.