Virtual Wallet Smartphone Bitcoins On Printed Circuit Board concept

A fund manager that was denied regulatory approval for its Bitcoin investment fund is now asking the Ontario Securities Commission (OSC) for a public hearing to review the decision.

Last month, the OSC denied a receipt for the prospectus of Toronto-based 3iQ Corp.’s Bitcoin Fund, ruling that it would not be in the “public interest” to approve a fund based on Bitcoin amid concerns about the suitability of cryptocurrency as an investment. The OSC decision also pointed to the lack of regulation for cryptoassets, along with concerns about liquidity, custody and security.

Now, 3iQ is seeking orders setting aside the OSC’s decision, and an order receipting the Bitcoin Fund’s prospectus. In its application, 3iQ argued that the regulator set tougher standards for its fund in terms of valuation, custody and liquidity, compared to what other investment funds face. The firm also argued that it is in the public interest to allow retail investors and advisors to gain exposure to Bitcoin through a regulated investment fund, rather than directly buying Bitcoin in an unregulated market.

“The [OSC’s] decision fails to promote efficient capital markets and confidence in capital markets because it prevents retail investors from accessing bitcoin through a regulated, professionally managed fund structure,” 3iQ said in its application, adding, “The fund is not intended to be a complete investment program for any investor, but rather a small allocation within an investment portfolio to provide diversification to an uncorrelated asset class.”

Additionally, 3iQ said the fund’s initial public offering would be completed by a syndicate of dealers regulated by the Investment Industry Regulatory Organization of Canada (IIROC), ensuring that “investors would have the benefit of investment advice from regulated investment professionals when considering the risk profile associated with an investment in bitcoin, and whether the asset is suitable for their portfolio.”

The application also reveals that 3iQ was expecting a public hearing to debate the merits of regulators approving a Bitcoin-based investment fund when it filed its prospectus.

“3iQ was advised by [OSC] staff that its next step toward obtaining a receipt for the prospectus of the fund would be to publicly file a prospectus, be refused a receipt and seek an opportunity to be heard before a panel of OSC commissioners, at which the OSC’s public interest jurisdiction to refuse a receipt for the prospectus would be debated,” it said.

“This hearing request is an important step for Ontario and indeed for Canada, to show leadership and address global concerns regarding the regulation and custody of cryptoassets,” Fred Pye, president and CEO of 3iQ, said in a statement. “With all the proper pieces in place, we have created an investment vehicle that we believe complies with Canada’s securities laws and seeks to address the needs of all Canadians, including the 5% of Canadians who have invested in bitcoin.”

“As seen in the recent collapse of QuadrigaCX, Canadians are investing in cryptoassets without the benefit of any securities regulation,” added Howard Atkinson, chairman of 3iQ. “We have worked long and hard with industry participants and the regulators to get to this stage, and we hope to successfully conclude this process at a hearing.”