The Ontario Securities Commission (OSC) has approved the first publicly traded bitcoin exchange-traded fund (ETF), the first of its kind in North America and around the world.
On February 11, the OSC revealed the approval document, which is filed under a Multilateral Instrument passport system and gives the ETF authorization in other thirteen Canadian jurisdictions.
Bitcoin traders will now be able to run ETFs in British Columbia, Quebec, Manitoba, Alberta, Saskatchewan, Nova Scotia, New Brunswick, Newfoundland, Prince Edward Island, Yukon, Nunavut, and Northwest Territories.
ETF to Invest in Invest Long-Term in BTC
The Bitcoin ETF will be used to track the price of bitcoin and allow investors to buy into the fund without dealing with bitcoin directly. It eliminates the complex processes that investors need to navigate or understand to successfully trade in the crypto market.
According to a factsheet posted by Canadian assets Manager Purpose Investments, the ETF will replicate Bitcoin’s price performance without ETF related fees and exchanges, and will not speculate on short-term price changes.
“The ETF invests in Bitcoin. Given the speculative nature of bitcoin and the volatility of the bitcoin markets, there is considerable risk that the ETF will not be able to meet its investment objectives.”
The ETF, therefore, bypasses the three key points that make new investors reluctant or unable to invest in bitcoin; using crypto exchanges, transferring bitcoin between wallets, and securely holding bitcoin in hot or cold wallets. They can now buy and sell the ETF using traditional market knowledge and structures.
The factsheet also states that the ETF is permitted to invest in asset classes or use investment strategies that are not permitted for other types of mutual funds.
“The specific strategies that differentiate this fund from conventional mutual funds may include the: ability to borrow cash to use for investment purposes and increased ability to invest in physical commodities.”
Additionally, more investors will be able to short sell bitcoin using the ETF, which in the long run will be good for reducing bitcoin’s volatility.
Ontario Securities Commission Overtakes US SEC
The US Securities Exchange Commission is yet to approve any bitcoin ETF, due to the many regulatory loopholes surrounding bitcoin and the emerging digital assets class in general.
In 2017, the US SEC denied an ETF application by the Winklevoss Twins, alleging lax regulation that would make bitcoin susceptible to fraud and manipulation. However, after much insistence, the US awarded them a patent for Winklevoss IP LLP for exchange-traded products, in 2018. The Chicago Board of Exchange also hoped for an ETF approval in addition to launching bitcoin futures and options.