Most Respondents File Negative Comments for SEC’s Review of VanEck/SolidX Bitcoin ETF

Multiple respondents have filed comments with the United States Securities and Exchange Commission (SEC) on the latest proposed rule change for the VanEck/SolidX Bitcoin (BTC) exchange-traded fund (ETF). Comments to date were submitted between Feb. 13 and March 12.

As reported, CBOE’s BZX Equity Exchange — the exchange that would prospectively list the Bitcoin ETF — had temporarily withdrawn its application for a rule change on the ETF in January, citing the negative impact of the U.S. government shutdown on the SEC’s operations. CBOE then resubmittedthe application for the SEC’s consideration at the end of the month.

On Feb. 19, the SEC announced that it would shortly be commencing the formal countdown period to approval or disapproval of the product, soliciting feedback from the public.

Among the seven comments filed thus far, six strongly urge the regulator not to approve the VanEck/SolidX proposal.

The sole response that affirms the positive value of the Bitcoin ETF approval is from respondent Sami Santos on March 12, who engages with the SEC’s previously given rationale for disapproving other ETF proposals:

“[Disapproval of] an ETF because of manipulation and […] the protection of investors is contradictory, because without an investment fund the investor is susceptible to buy bitcoins in deregulated exchanges and lose their investments.”

Noting that VanEck “offers insurance to cover possible losses,” Santos argues that ETF approval would create greater market security in providing more “liquidity, transparency and safe custody of assets that will have credibility for large investors.”

The lengthiest negative comment — from respondent Sam Ahn on Feb. 13 — focuses on Bitcoin’s lack of intrinsic value. Ahn accuses the ETF applicants and the 2008 Bitcoin white paper itself of “grand[ly] exaggerat[ing]” the mathematical complexity involved in Bitcoin mining. The applicants’ wording, he claims, “works like a moat around the castle of bitcoin mining, keeping us away from the reality of bitcoins.”

Other, more concise comments — echoing Ahn in part — focus on Bitcoin’s alleged lack of value as a financial product, its volatility and market manipulation “by the very few.” One respondent, D. Barnwell, does provide an argument that proposes:

“I would ask the SEC […] to take a ‘watch and wait approach’ […] [t]he true game changer is the underlying technology Blockchain, not the cryptocurrency. And to make inroads into this industry-changing technology, one does not need to have a financial product based on the cryptocurrency.”

As previously reported, SEC chairman Jay Clayton has recently stated that there “may be a case where a Bitcoin ETF could satisfy our rules.” He suggested the technology is “demonstrating significant promise in the places where it’s consistent with our approach to capital raising in the past.”

The SEC is also soliciting industry input as it potentially reconsiders existing custody rules in specific cases of digital asset trading and settlement.

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