Canadian funds get OK for bitcoin ETFs after regulatory review

Investors will hold actual currency in portfolio, but can buy, sell it like stock

Bitcoin-based exchange traded funds are getting the go-ahead from Canadian regulators, creating a path for a fund structure that investment managers say is unique in the industry.

Toronto-based Purpose Investments says its bitcoin ETF will likely start trading this week under the symbol “BTCC,” after the fund worked with regulators to make sure it could create something that follows the rules for both the ETF market and the digital asset industry.

An Ontario Securities Commission spokesperson says the regulator finished reviewing Purpose Investments’ final plan to offer securities last Thursday and gave the fund a receipt that makes it a reporting issuer in Ontario.

After Purpose Investments announced the milestone, another Canadian fund, 3iQ, said it also received preliminary receipts for a bitcoin ETF in all of the Canadian provinces and territories except for Quebec.

Both funds claim to be “physical” bitcoin ETFs, setting them apart from some of the other cryptocurrency investments out there, such as the bitcoin futures that trade on the Chicago Mercantile Exchange.

Purpose Investments chief investment officer Greg Taylor says that the fund is different from a derivative or futures contract, as Purpose Investments will buy bitcoin every time someone puts money into the ETF.

Taylor says Purpose Investments will also store the bitcoin codes themselves, not on the internet, using a process called “cold storage.” OSC has described cold storage as “a computer with no access to a network” that is less vulnerable to hacking.

Purpose Investments says the end result of these bitcoin ETFs is that investors will hold actual bitcoin in their portfolios but can buy and sell it similarly to buying or selling a stock.

“The risk is for traditional investors that you have to open up a trading account to buy bitcoin and you’re in self-custody — meaning you’re going to get the code and password for that coin. And you’re responsible for doing that,” says Taylor. “With the ETF structure, it’s going to be easier as we’ll do that with our custodian.”

A CIBC subsidiary, Gemini Trust Company, is working as a fund administrator for Purpose Investments’ bitcoin ETF, as the bank looks for ways to meet rising demand for cryptocurrencies.

3iQ chief executive Fred Pye says a physical bitcoin ETF is the natural progression from its other investment vehicles, which include a publicly listed bitcoin investment fund and a fund based on cryptocurrency Ether.