VanEck, the money management firm has recently responded in a letter to the SEC’s concerns over Bitcoin ETF. The letter that was addressed to Dalia Blass, director of the SEC’s division of investment management, was made public on the agency’s website.
The letter addresses to the five points of order from the SEC’s previous communication with the industry. These five points entail liquidity, valuation, custody, arbitrage, and potential manipulation.
Van Eck’s Responses
Liquidity
In its response to the SEC’s concerns about the proposed ETF’s liquidity, VanEck highlights that the Bitcoin market is quite a liquid one. It also mentions that the Bitcoin futures market has been quite efficient compared to the physical Bitcoin market with the total volume of the CME and CNOE coming up to $200 million. The firm in its clarification mentioned that it does not intend its proposed ETF to invest in physically-settled Bitcoin futures contracts even if they become available.
Valuation
VanEck responded that it does not see valuation as a new issue for a futures-based Bitcoin ETF. It mentions that it is already a common practice to use futures to build an investment profile in an asset. According to the firm, the prices from CME and CBOE are sufficient to adequately determine an ETF’s net asset value (NAV).
Custody
VanEck clarifies that its ETF won’t invest in physically settled Bitcoin contracts. It may, however, engage with market players to seek a solution to satisfy direct custody requirements. Until that’s possible, the firm says the status quo remains in effect.
Arbitrage
As reported by CCN, speaking on the issue of arbitrage trading, the letter mentions that the diversified, decentralized nature of Bitcoin exchange activities allows for arbitrage trading owing to price inefficiencies and differentials across various exchange platforms.
Potential Manipulation and Other Risks
In VanEck’s opinion, these kinds of risks with its ETF are mitigated by its nature as a regulated product that is traded on a U.S. exchange.
The post VanEck’s Response Tackles SEC’s Five Points From Previous Communication appeared first on OWLT Market.
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