Vancouver-based First Block Capital Inc. is Canada’s first registered investment fund manager and exempt market dealer devoted to cryptocurrency investing.
The firm’s fund, Canadian Bitcoin Trust (CBT), is an open-ended unit trust that invests only in bitcoin based on a purely passive investment strategy. CBT is to be distributed under existing prospectus exemptions.
The firm, which is now registered in both British Columbia and Ontario, is subject to certain conditions designed to accommodate its novel business model, which regulators have determined requires “additional reporting … to monitor developments in this new area,” according to an announcement published Wednesday by the B.C. Securities Commission.
Among other things, First Block must provide regulators with reporting on its oversight of the cryptocurrency custodians and brokers it uses in running and distributing its fund, along with reporting on its own operations.
The conditions imposed on First Block, “were crafted to give flexibility to allow them to operate under the present regulatory framework, and give tools to the BCSC to evaluate the identified risks of this innovative fund type,” the BCSC says in its announcement.
The BCSC, which is First Block’s principal regulator, notes that cryptocurrency investments pose novel risks, including “cybersecurity risks inherent in dealing with digital currencies”, along with the risks posed by the custodians that are charged with the safekeeping and exchange of bitcoins.
The regulator also notes that it launched its fintech unit, the BCSC Tech Team, back in January in order to help fintechs navigate the existing regulatory environment. It intends to report on its efforts later this year, “summarizing results of its outreach and proposing next steps to meet the needs of B.C. financial technology industry participants.”
“Cryptocurrency investments are a new and novel form of investing in Canada. We have seen from the market and from investors that there is a strong appetite for access to these kinds of investments. This first registration allows access to bitcoin investments, while providing the BCSC with unique mechanisms to monitor operations in a rapidly developing area,” says Zach Masum, BCSC Tech Team leader, and manager, legal services, capital markets regulation, BCSC, in a statement.
“We strongly encourage other companies in British Columbia, whether they are potential new registrants or existing investment fund managers, to contact the BCSC’s Tech Team if they are considering pursuing cryptocurrency investments in their funds,” adds Masum. “The Tech Team can help ensure compliance with securities regulation, which can help save time and potential costs later on.”
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