Canada Approves Breakthrough Bitcoin Exchange Fund

Canada’s principal financial regulator has approved the launch of the world’s first exchange-traded fund linked to Bitcoin, bringing the cryptocurrency a step closer to the mainstream.

The Ontario Securities Commission confirmed it has cleared the launch of the Purpose Bitcoin ETF, which will seek to replicate the performance of the price of Bitcoin, less the ETF’s fees and expenses, according to a fact sheet provided by Toronto-based Purpose Investments.

Exchange-traded funds are similar to mutual funds, but are traded on stock exchanges throughout the day, while mutual funds are traded based on their value at the close of trading.

Such funds generally aim to trade as close as possible to an asset’s net value, unlike other types of funds which may trade at a premium.

Investor access

“The ETF will be the first in the world to invest directly in physically settled Bitcoin, not derivatives, allowing investors easy and efficient access to the emerging asset class of cryptocurrency,” Purpose Investments said in a statement.

The fund is to trade on the Toronto Stock Exchange under the ticker BTCC.

Cidel Trust Company is to be the custodian of the ETF while Tyler and Cameron Winklevoss’ Gemini Trust Company is the sub-custodian and Ernst and Young is the auditor.

Bitcoin is currently trading at over $47,000 (£33,900), up from $10,000 a year ago and less than $1,000 in January 2017, a dramatic rise that has spurred intense investor interest.

The cryptocurrency has gained about 63 percent so far this year and about 1,130 percent since mid-March 2020.

Last week electric carmaker Tesla disclosed it had acquired $1.5bn in Bitcoin and said would accept the cryptocurrency as a form of payment for its automobiles, an announcement that caused a further price rise in the virtual asset.

Mainstream interest

Cryptocurrency has also been gaining acceptance amongst mainstream financial companies, while central banks have explored creating versions of the technology that might be less subject to volatility.

In another sign of mainstream interest, the city of Miami last week voted to explore handling some city government transactions in Bitcoin.

Several firms in the US have tried to create Bitcoin ETFs, but have been turned down by the Security and Exchange Commission, which has typically cited concerns such as the potential for market manipulation.

Some industry watchers have speculated the SEC might soon follow Canada’s lead, with others pointing out that the regulator’s new leadership is likely to take its time in reviewing investment firms’ ETF applications.

The incoming US administration named former Commodity Futures Trading Commission chair Gary Gensler as head of the SEC in January.

Bitcoin remains subject to large price swings, with a dramatic 2017 rise followed by a crash of 80 percent that affected cryptocurrencies across the board from January to September 2018.