Bitcoin Futures have faced unusual hurdles from the US authorities. There are ways around this but these ways are often limited and high risk. However, Vaneck Securities and Solidx seem to have found the solution.
Due to the many regulatory hurdles that the United States Security and Exchange Commission (SEC) has placed on the implementation of the listing of cryptocurrency exchange-traded funds (ETFs), including Bitcoin ones, Vaneck Securities and Solidx Management have decided to use creative ways and means to be able to achieve this.
On a normal day, all ETF proposals have to follow due process of thorough investigations and appropriate filings and processes with by all applicants. There exist a few exemptions and bypasses which if properly implemented can always still change the game.
The great thing is that Vaneck and Solid X have a Bitcoin trust which can be offered on a “private-basis” only to certain investors. Going by most of the rules of the SEC, retail sales of any security public or private is a very tough call on the part of all parties involved in the process of sale.
Here Comes the SEC Rule 144A
Following various delays of their ETF proposal from the SEC with the last one occurring on August 12th, both parties decided to follow a certain SEC rule which allows them to be able to offer Bitcoin futures to institutional investors.
Known as the SEC rule 144A, the rule specifically allows for restricted trading of securities to private investors who are institutional in nature. Such buyers must also be qualified as institutional buyers who may hold such securities for a period of six months to one year gives this kind of arrangement the short window period for entry and exit from the restricted market place which has been created.
Such arrangements are profitable and give easy market entry to big guns who may want to play it fast rather than stick to the laid down procedures.
This, of course, allows for the creation of quick capital inflows which produce a boost within the markets where such transactions take place.
Major Problems with Private Sales
Private transactions such as this are not subject to the scrutiny of the SEC. Although by law all transactions are subject to be registered with the commission, the deeper kind of scrutiny for such transactions such as the total duration of holding of transactions, the process of the sale, amount of sale and so on, won’t be met and this leaves such transactions to be open for fraud and misrepresentation.
Also, the settling of such futures will prove to be tricky as such transactions may end up being passed from one hand to another. Furthermore, shadowy foreign actors will gain some sort of access to the United States financial markets (albeit in a limited capacity) and be able to make the kind of murky profits that are only seen and heard about in the movies.
A Way Out
This is why partnerships such as the BAKKT platform which has its own warehouse for physical settlements of cryptocurrency futures offer a reliable means and method for cryptocurrency holders to be able to securely buy and sell their holdings.
Bakkt’s warehouse is due to launch later this month and will provide a route through for cryptocurrency investors large and small. Although Bakkt has faced its own share of hurdles, being owned and run by Intercontinental Exchange (ICE) is a big deal.
ICE also owns and runs the New York Stock Exchange. So, you can expect the kind of professional touch that the NYSE has.
The moral of the story is: “All good things come to those who wait”.