Crypto Projects Launching Through Regulatory 'Back Doors'

The VanEck / SolidX product uses the SEC's Rule 144 exemption
The product is not exchange-traded and will trade over-the-counter
Identical to the Grayscale Investment Product that has been around for 6 years
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day

CRYPTO MOVERS AND PRICES

 

 

CRYPTO STORY OF THE DAY

VanEck Securities and SolidX management announced they were launching a 'limited version of a bitcoin ETF. As many news outlets have already pointed out, the product is not an 'exchange-traded fund'. This is the second instance in 2-months a crypto business has used some exemption to launch without outright regulatory approval of their previously stated mandate.
 

The VanEck / SolidX product uses the SEC's Rule 144 exemption which essentially allows private securities to be sold to institutional investors. The product is not 'exchange-traded,' with the company admitting the 'shares' will trade over-the-counter and only be offered among institutional investors. The firm is essentially selling participation in a trust structure sponsored by SolidX. In August BTC futures provider Bakkt decided to move forward with their offering, similarly deciding to 'self-certify' their derivative products as opposed to receiving direct approval from the CFTC.

 

Takeaway: The VanEck / SolidX headlines border on untruthful. The official announcement, which goes on to say the products are first of their kind, frequently references ETFs without being an 'exchange-traded' fund at all. In fact, the offering is described as almost identical to the Grayscale Investment Product which has existed for 6-years. These trust products historically, while providing fiat-settled exposure to BTC, are inflexible, with long lock-ups and no guarantee of secondary liquidity. The questions now surround how regulators will react to two major crypto projects launching through regulatory 'back doors' and, even indirectly, implying they have received highly anticipated versions of their approval through the media.

About the Author

FRNT Financial is an Institutional Brokerage which offers clients a variety of products along with research & analytics in the crypto-space.