VanEck Proposes Initial Funding in Bitcoin Instead of Cash for its ETF

VanEck, the asset management giant, has proposed a revolutionary approach in its quest to launch a Bitcoin ETF.

In its updated prospectus, the company has adopted language similar to that of its competitor, BlackRock, but with a bold twist: Instead of using cash as initial funding, VanEck is recommending the use of actual Bitcoin to back its ETF.

The key term here is “initial financing” or “seed funding.” In the context of ETFs, this refers to the process in which financial institutions provide capital to acquire the underlying assets of the ETF in exchange for shares that can be traded on the market on the day the ETF is launched. In other words, provide much-needed initial liquidity.

The similarity in language used in VanEck and BlackRock’s prospectuses could be attributed to the fact that both companies share the same law firm, Clifford Chance, as mentioned by Scott Johnsson, via his X account.

Similar language to the Blackrock amendment re: seeding. Perhaps not too surprising given both issuers are represented by the same lawyers at Clifford Chance. Except here, instead of seeding with cash like iShares, Vaneck suggests they'll seed with bitcoin. https://t.co/8Y0JjWfwdS pic.twitter.com/r8ZgYSmCsj

— Scott Johnsson (@SGJohnsson) October 29, 2023

What makes VanEck’s proposal unique, however, is his recommendation to use real Bitcoin instead of cash as initial funding.

Instead of purchasing underlying assets with cash, VanEck suggests that banks and brokerages contribute actual Bitcoin to purchase ETF shares.

This would be a novel approach as it would mean that the ETF would have direct exposure to Bitcoin from day one of its launch.

There Are Still Outstanding Questions For VanEck

The United States Securities and Exchange Commission (SEC) has faced a complicated issue in the past when it comes to approving a Bitcoin ETF due to concerns about fraud, investor protection, and potential market manipulation.

The news emphasizes that, although this proposal might represent a bold and revolutionary step, it remains uncertain when and if the SEC will ultimately approve a Bitcoin ETF.

VanEck submitted its application for a Bitcoin ETF in July 2023, becoming part of a group of other major financial firms that have likewise lodged similar applications with the SEC.

With increasing pressure for a Bitcoin ETF to gain approval in 2023, the crypto community eagerly anticipates further details on the debut of the inaugural Bitcoin ETF in the United States.