The first publicly traded bitcoin exchange-traded fund (ETF) in North America has been given the nod by Canada’s financial regulator.
According to a decision document on Thursday, the receipt of approval from the Ontario Securities Commission (OSC) was filed under a Multilateral Instrument passport system in multiple Canadian jurisdictions.
Those territories include British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.
While multiple close-ended bitcoin funds have been listed on the Toronto Stock Exchange, such as the ones listed by Canadian investment manager 3iQ, they differ from an ETF. In the case of an ETF, units are issued on a continuous basis while close-ended funds issue units at their initial public offering and reopenings.
The fund seeks to replicate the performance of the price of bitcoin minus the ETF’s fees and expenses, according to a fact sheet posted online by Canada-based asset manager Purpose Investments. The ETF will also not speculate on short-term changes in the price of bitcoin.
Investors seeking long-term capital growth, attractive risk-adjusted rate of return and those who can tolerate “high risk” are the type of investors the fund is targeting, according to the fact sheet.
ETFs contain a basket of investments, similar to mutual funds, but trade on exchanges much in the same way stocks do. While risk between funds fluctuates based on the asset type, the bitcoin ETF is considered “high risk.”
Those seeking a “steady source of income” from their investment are advised against buying into the fund.
The expenses of the fund consist of a management fee as well as operating and trading costs whereby the annual management fee is currently set at 1% of the value of bitcoin. Due to its fresh origins, operating expenses and trading costs are yet to be provided.
Meanwhile senior analyst at Bloomberg, Eric Balchunas, believes the fund in Canada is a “good sign” for a U.S.-sanctioned bitcoin ETF.
The Toronto Stock Exchange is expected to list the fund in Canadian dollars while the portfolio and fund will be managed by Purpose Investments.