on the crypto
The first publicly traded bitcoin exchange-traded fund (ETF) in North America has received the green light from the Canadian financial regulator.
The Bitcoin ETF authorized in almost all of Canada
According to an official document released Thursday, a receipt certifying approval from the Ontario Securities Commission (OSC) has been filed under a specific passport system for the instrument in multiple Canadian jurisdictions.
Among the territories involved are British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.
Although several closed-end bitcoin funds have previously been listed on the Toronto Stock Exchange, such as those listed by Canadian investment manager 3iQ, these are actually very different from an ETF. In the case of an ETF, units are issued on an ongoing basis while closed-end funds only issue units at their initial public offering and upon reopening.
A high risk ETF
The fund seeks to replicate the performance of the bitcoin price (quotation BTC) less fees and expenses, according to a fact sheet published online by Canadian asset manager Purpose Investments. The ETF will not speculate on short-term changes in the bitcoin price.
According to the factsheet, the fund is aimed at investors seeking long-term capital growth and a risk-adjusted rate of return and who may include “high risk”. ETFs contain a basket of investments, similar to mutual funds, but are traded on exchanges in the same way as stocks.
The risk of an ETF is based on the type of underlying asset and the bitcoin ETF is considered "high risk". For this reason, it is not recommended for those looking for a "steady source of income" from their investment.
The fund's expenses consist of a management fee, as well as operating and trading costs, for which the annual management fee is currently set at 1% of the bitcoin value. The fund is so new that its operating expenses and trading costs have not yet been disclosed.
Will the United States follow suit?
Eric Balchunas, a senior analyst at Bloomberg, said he believes the Canadian-authorized fund is a "good sign" for a possible future US-authorized bitcoin ETF. “I love their liberal [Canada] regulators, or maybe they're normal and the SEC [Securities and Exchange Commission] are too conservative,” Balchunas tweeted wryly.
"In any case, the United States usually follows suit shortly thereafter." The Toronto Stock Exchange is expected to list the fund in Canadian dollars and the portfolio and fund will be managed by Purpose Investments.
