Purpose Investments looks set to introduce North America’s first directly backed bitcoin ETF following approval by Canadian securities regulators. It will also become the first exchange-traded bitcoin product of any major developed market to officially sport the ‘ETF’ moniker (similar products in Europe are typically structured as debt securities and use the ETP designation).
Purpose Investments has received regulatory approval to launch a bitcoin ETF.
The Purpose Bitcoin ETF is now cleared to list on the Toronto Stock Exchange (TSX) where it will be offered in US dollar (BTCC.U CN) and unhedged Canadian dollar (BTCC.C CN) share classes, subject to TSX approval.
The fund, which is authorized as an “alternative mutual fund” under local regulations, will track movements in the world’s largest cryptocurrency based on the daily spot price of the TradeBlock XBX Index.
The fund will be fully backed by ‘physically’ settled bitcoin, offering investors direct access to the cryptocurrency without the inconvenience, technical challenges, and associated risk of self-custody within a digital wallet.
According to Purpose, the firm worked in close coordination with the Ontario Securities Commission (OSC) to address the unique challenges in creating an effective bitcoin ETF. This included ensuring daily liquidity and incorporating various mechanisms to satisfy standards within both traditional ETF markets and the digital asset industry.
The fund’s bitcoin holdings are kept in ‘cold storage’ – considered the most secure custody solution in the market. Purpose Investments has collaborated with Gemini Trust, which will act as sub-custodian, and CIBC Mellon Global Securities Services, as fund administrator, to provide investors with confidence regarding the safe and effective purchase, settlement, and custody of the underlying bitcoin and administration of the ETF.
Som Seif, Founder and CEO of Purpose Investments, commented: “The OSC was a crucial working partner in the launch of Purpose Bitcoin ETF and we are grateful for their willingness to work with us through this process. Their cooperation and guidance made it possible for us to move forward on getting this novel ETF into the hands of investors.”
The price of bitcoin in USD has soared over the past year, from a low of around $4,850 on 12 March 2020 to its current flirting with the $50,000 mark.
The rally is being driven by increased demand for cryptocurrency exposure from both retail and professional investors as well as bitcoin’s adoption by some well-known corporate names – the price of bitcoin recently jumped on the news that Tesla had bought $1.5 billion worth of bitcoin and would begin accepting the cryptocurrency as a means of payment.
“Bitcoin has been gaining popularity among individual and institutional investors for years now; however, it remains a difficult asset to gain efficient and secure exposure to,” said Seif. “The Purpose Bitcoin ETF will change the landscape for investors by giving them a simple, efficient, and affordable way to directly access the cryptocurrency.”
The ETF is set to list with a management fee of 1.00%.
Its approval is likely to open the gates to other products with Evolve Funds and Horizons ETFs also in the process of seeking approval for a Canadian-listed bitcoin ETF.
Meanwhile, in the US, several attempts have been made to launch a bitcoin ETF with Direxion, First Trust, GraniteShares, Grayscale, ProShares, VanEck, and WisdomTree all having previously sought to introduce products. The US Securities and Exchange Commission has, however, denied these applications to date, citing the cryptocurrency’s vulnerability to manipulation and its inappropriateness for retail investors. This appears to have worn down these firms’ resolve, although perhaps only temporarily, with VanEck being the only company currently with an active bitcoin ETF filing.
Europe offers several bitcoin ETPs which are tailored exclusively for institutional investors. These include products by ETC Group, WisdomTree, 21Shares, and CoinShares.