Bitcoin 144A Securities Off to a Slow Start
Institutional investors have yet another channel to gain exposure to bitcoin besides using physically- and cash-settled bitcoin futures.
While waiting for the US Securities and Exchange Commission to finally approve its proposed bitcoin ETF, VanEck and SolidX have launched a bitcoin security under Rule 144A.
“It is the first open-ended DTC-eligible bitcoin security that can be held in a brokerage account and is designed to trade close to the net asset value per share,” said Gabor Gurbacs, director, digital assets strategy, at VanEck, during a webinar hosted by the Tabb Group and sponsored by BitGo.
The new offering comes from the same trust that VanEck’s plans to use for it proposed bitcoin ETF, he added.
VanEck decided to take the 144A route since the security type is well understood, especially regarding bonds.
“Larger funds are used to buying these shares on Bloomberg,” said Gurbacs.
In the first month of its operation, the trust issued approximately 64,000 shares while holding about 64 bitcoins in trust using a multi-factor cold-storage security design and having total net assets of roughly $531,000.
“The market is somewhat dormant right now,” he said, sharing his personal opinions. “It is in the market, and you can get it today. The volumes are probably going to pick up in the next few weeks as we build up the infrastructure behind it.”
VanEck uses an index provided by MV Index Solutions to price the trust’s shares on the OTC Expert Market.
Also, unlike other private securities, there is no seasoning of shares, he added. “Shareholders can trade freely among themselves.”
VanEck still plans to go forward with its planned bitcoin ETF offering, which the firm considers it as the “big brother” of its 144A offering.
Despite the SEC’s recent adoption of a new rule and several amendments that modernize the regulatory framework of most ETFs, Gurbacs noted that the new streamlined process would not bring bitcoin ETFs to market quicker.
“The more complicated structures, such as the bitcoin ETF, will still have to go through a similar 19b-4 type of process as usual,” he said. “The short answer is: ‘It will have no impact on the timeline.'”
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The cash settled contracts will be listed on ICE Futures Singapore.