by Joseph Young
SolidX Bitcoin Trust, a Bitcoin ETF (exchange-traded fund) developed by SolidX Management LLC, has filed a new S-1 statement with the Securities and Exchange Commission (SEC), with some important changes in the Trust’s Bitcoin security system and Bitcoin insurance.
A month ago, SolidX Bitcoin Trust was introduced to the market to challenge both established and emerging ETFs including Grayscale Investment’s Bitcoin Investment Trust (GBTC) and the Winklevoss Bitcoin Trust by one significant advantage over any cryptocurrency-based ETFs in the market: insurance.
Investors and shareholders of Bitcoin ETFs in major stock exchanges normally expect to receive insurance for their possession of Bitcoin. Since cryptocurrency exchange-traded funds are valued substantially higher than its actual market price, buyers of Bitcoin ETFs are essentially paying a premium to purchase the digital currency through a regulated and registered entity in the public stock market.
However, all Bitcoin ETF providers in the market today fail to offer any insurance to its shareholders and investors. More interestingly, they make it clear that purchasing cryptocurrencies through their ETFs means that the investors must be responsible for the losses of the Bitcoin held by the ETF providers.
The significantly high premium rates and the failure of ETF providers to offer insurance triggered a very controversial yet important discussion in online Bitcoin communities; why are investors still paying a high premium to purchase cryptocurrency through Bitcoin ETFs?
Some corporations, especially multi-billion dollar corporations with a rigid corporate and financial structure, struggle from dealing directly with digital and online currencies. By established standards and policies agreed amongst shareholders and the company’s executives, they are only allowed to invest in certain assets and funds. In these situations, even if corporations want to purchase and hold onto Bitcoin, they need to go through a regulated public entity to store their Bitcoin in a form of public asset.
Because of this interest from traditional investors and corporate buyers, Bitcoin ETFs like Bitcoin Investment Trust has seen a spike in price which maintained its momentum consistently over the years. GBTC for instance, sometimes records a 20 to 50 percent premium over the actual market price of Bitcoin, costing investors more than they expect.
The more serious issue with GBTC and other exchange-traded funds lies behind its insurance policy. For high profile investors and corporate buyers, spending an extra 20 percent may not alter much of their budget allocation. But, if the ETF provider loses its storage of bitcoin from a potential security breach or hacking attack, they have no insurance or guarantee that they will receive their fair share of the digital currency.
This is where SolidX Bitcoin ETF has a significant advantage over competing cryptocurrency ETFs in the market. Shareholders and investors of SolidX ETF are guaranteed with their share of bitcoin and are insured from hacking attacks and any form of security breaches.
The changed SEC filing of SolidX Bitcoin ETF solidifies their insurance policy, which states that:
“The Crime Insurance policy covers loss of bitcoin up to a maximum of $10,000,000 caused by:
Robbery, burglary, theft, mysterious unexplainable disappearance, and damage thereto or destruction thereof, while the private key(s) associated with the Trust’s bitcoin (the “Property”) is within the Insured’s premises.
Direct loss while the Property is in transit anywhere in the custody of an employee of the Insured, a messenger, an armored motor vehicle company, or any other person or entity duly authorized by the Insured to have custody.”
The alterations in the new SEC filing of SolidX clarifies that any loss of bitcoin caused by robbery, burglary, or theft will be insured, allowing investors and shareholders to retain their Bitcoin from the SolidX Management LLC.
With reliable insurance policies and security measures, SolidX ETF will offer a clear advantage over existing ETFs for high profile investors and corporate buyers. If and when SolidX ETF is accepted by the ETF and debuts in the public market, it will create a disruption in the cryptocurrency exchange-traded funds industry, attracting investors away from more well-known bitcoin instruments.