The business behind Canada’s first bitcoin fund is looking to assist fund managers in the United States in “moving the needle.”
3iQ, a digital asset management, is hoping to use its expertise in dealing with Canadian securities authorities to help the US spot bitcoin ETF issuers get an advantage.
Though 3iQ does not intend to file for its own ETF in the United States, Chris Matta, head of the firm’s US division, told Blockworks that the company is in discussions with US issuers about possibly “putting [its] weight” behind their submission.
The Securities and Exchange Commission has repeatedly rejected efforts by fund organizations to create a spot bitcoin product. Rather than adding another proposition to the mix, Matta believes that working with one or more enterprises might be a more effective way to “move the needle” in the United States.
In April 2020, 3iQ established Canada’s first bitcoin fund, a closed-end investment instrument priced in US dollars for approved investors. It is a publicly-traded company on the Toronto Stock Exchange. The company has worked with the Ontario Securities Commission before (OSC).
“We fought the OSC and won using a data-driven strategy, and then we operated that product perfectly for two years,” Matta said. “That is something that may be really beneficial to some of these issuers in the United States who are wanting to square off against the SEC.”
3iQ collaborated with the OSC’s Investment Funds and Structured Products (IFSP) division for more than two years until the IFSP director ruled in February 2019 that bitcoin was an illiquid asset, thereby terminating the fund. The fund group petitioned the OSC for a hearing and reconsideration of the director’s decision, and the fund was eventually authorized.
At the end of 2020, the company will launch its Ether Fund. It subsequently introduced the 3iQ CoinShares ETF (BTCQ) roughly a month after Purpose Investments introduced Canada’s first bitcoin ETF.
“We pushed the Canadian regulators,” Matta said. “It’s placed pressure on US authorities, and more asset managers are now pushing the envelope.”
Grayscale Investments has been particularly active in its efforts to convert its Bitcoin Trust (GBTC) to an ETF – a request that the Securities and Exchange Commission is set to decide on in July.
Grayscale, the world’s biggest digital currency asset management, has invited investors to write to the agency in favor of its plan, resulting in several thousand letters.
Grayscale CEO Michael Sonnenshein recently reaffirmed his statement that “all alternatives are on the table” if the SEC rejects the application, including suing the agency.
While the introduction of US spot bitcoin ETFs would add competition to the Canadian ETFs currently available from 3iQ and others, Matta believes it would be an “inflection moment” in terms of expanding crypto acceptance.
Matta, on the other hand, believes that the SEC will not approve a spot bitcoin ETF until the second half of 2023 or 2024. He referenced recent statements made by the SEC’s chairman, Gary Gensler, regarding the need for crypto platforms to register with the SEC.
“Until they have that supervision in place, I don’t believe they’ll feel comfortable sanctioning a bitcoin ETF,” Matta said. “The runway remains lengthy.”
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