Exchange-traded funds (ETF) providershope to have cracked regulators' code for creating the firstexchange-traded product backed by bitcoin—but it's going to costyou.Van Eck Associates Corp. and SolidX Partners Inc. filed arequest to list a bitcoin-linked exchange-traded product (ETP) tothe U.S. Securities and Exchange Commission (SEC) on Wednesday. Thefund will be physically backed, which means it will hold actualbitcoin, and will be insured against loss or theft of thecryptocurrency, according to the firms.The SEC asked companies topull about a dozen applications for cryptocurrency-linked productsin January, and last year rejected the Winklevoss Bitcoin TrustETF. SolidX and VanEck were among the companies that had filed tolist funds. They hope to have addressed regulators' concerns withchanges they made in the new, joint request by increasing the shareprice and basing prices off regulated trading firms, according toSolidX CEO Daniel H. Gallancy.“Based on various comments, it seemsthat regulators are concerned right now about having an ETF that isavailable to retail investors,” Gallancy said in a telephoneinterview. “We think that will change over time, but right now agood place to start is with a product geared purely towardinstitutional investors.”Hopes for a bitcoin ETF were running highlast year after the CME Group Inc. and Cboe Global Markets Inc.listed bitcoin futures, as investors speculated the SEC mightapprove funds linked to financial instruments trading on majorexchanges. But those expectations soured as regulators said theywere concerned about the high volatility and lack of depth in themarket, and about pricing and trading that would be based onlightly regulated platforms.SolidX and VanEck want to addressthese concerns by basing prices for the VanEck SolidX Bitcoin Truston an index that tracks over-the-counter trading by U.S.-basedinstitutions, which are regulated by the U.S. Commodity FuturesTrading Commission. MVIS, a subsidiary of New York-based VanEck,will compile the index and publish price updates throughout theday.VanEck oversees more than $45 billion in assets and managesmore than 70 exchange-traded products. SolidX is a New York-basedfinancial technology company, developing cryptography software andcapital markets products.If approved, the fund will have a shareprice of approximately $200,000, compared with most ETFs whichlaunch with double-digit share price, to target institutionalinvestors, Gallancy said. This would be a change from the focus inthe ETF industry, which has traditionally been on individualinvestors.SolidX would handle custody of bitcoin using a so-calledcold storage solution, which means so-called private keys thatserve as ownership codes are kept offline. Funds would be insuredone-to-one by a syndicate of insurers, which the firms didn'tdisclose.VanEck had previously filed a bitcoin future-based ETF. Aphysically backed bitcoin ETF would be attractive as it wouldtracks bitcoin spot prices more closely, said the firm's head, Janvan Eck. Both van Eck and SolidX's Gallancy say they ownbitcoins.

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