The VanEck SolidX team has made a bold presentation to newly appointed SEC commissioner, Elad Roisman over their bitcoin ETF ambitions. But did they push it too far?
New Commissioner Promising for Bitcoin ETF Chances
At the time of Roisman’s appointment to the commission on September 5th, there was considerable excitement among many that the appointment of a man considered pro-crypto was to join the commission. At the Banking Housing, and Urban Affairs committee hearings, the new appointee said on digital currencies:
“It is essential that the SEC approach these new challenges in a fair and transparent manner, provide clarity and certainty to the markets and investors, and enforce the laws and regulations that hold market participants accountable.”
Representatives of VanEck, SolidX, and the CBOE took the opportunity to address Roisman with their arguments as to why their application for a rule change should be approved. But their 12-page presentation may not have done them many favors.
VanEck Submission Made Some Rather Pointed Arguments
The VanEck SolidX ETF had been considered the most likely to get the regulator’s first nod given the sophistication of its product and its entry price of around $200,000 USD–making it out of reach for non-accredited investors. The October 9th submission to Roisman was, on face value, designed to highlight that their application both addressed the concerns the SEC had and was a working product awaiting a green light.
But their tone was pointed and may have come across as disrespectful of the body. The representatives cited the U.S. Securities and Exchange Commission’s argument that:
“The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop. Should such markets develop, the Commission could consider whether a bitcoin ETP would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act.”
Their response to that particular concern suggested a suspicion the regulator was playing games with ETF applicants:
“As issuers, we are concerned the SEC staff have created a moving target in their use of the word “significant”… The Staff have never provided guidance as to what “significant” means, enabling them to move the goal post indefinitely.”
Channeling Commissioner Hester M. Peirce
Commissioner Hester M. Peirce, a dissenter in the second Winklevoss ETF denial, argued that having institutional investment in the bitcoin market would benefit cryptocurrencies by resolving some of the problems troubling the SEC.
“More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.”
Referring no doubt to this line of argument, the VanEck team quoted section 6(b)(5) of the Securities Exchange Act, “The rules of the exchange are designed … in general, to protect investors and the public interest …”.
They argued that investors in bitcoin now face a risk of theft, lack true price discovery due to manipulation, and face counterparty risks because there is no settlement procedure. An insured ETF would ameliorate all these problem, they argued.
The Persistent Double Standard
In the final section of the presentation they referred to what they see as the persistent double standard–the SEC’s approach to ICOs and altcoins– labeled “ICO and altcoin offerings continue unabated”–and their Bitcoin Trust proposal, which they described as being “in limbo”.
While their product benefits from significant disclosure, safeguards for investors, would be registered, regulated, insured, and managed by an experienced issuer, people of sometimes unknown identities with no working products continued issuing initial coin offerings while a bitcoin ETF proposal awaited approval.
They concluded with a contrast:
“1000+ ICOs and altcoins in the market… ZERO bitcoin ETPs in the market.”
Too Clever by Half?
The VanEck SolidX proposal had been regarded as the gold standard among all proposed bitcoin ETF products, and its approval widely regarded as inevitable. Whether a meeting with a new commissioner, a PowerPoint presentation, and some rather targeted finger pointing will get them any closer to an ETF remains to be seen.
Have your say? Did VanEck SolidX harm their reputation with this presentation?
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