When it comes to regulated Bitcoin funds, the US Securities and Exchange Commission (SEC) has been less than welcoming. It has declined every application for a Bitcoin ETF that it has passed judgment on, while it has also banned American investors from using a Swedish USD denominated BTC ETN. However, just north of the Canadian border a regulation revolution is taking place.
First Block Capital Inc (First Block) had their application for a Bitcoin fund approved back in September 2017. Adding to that, it just received mutual fund trust status. This new status allows unit holders to put units in a self-directed registered account, such as a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA).
Accredited Investors Only
Unlike an ETF, this new fund is only available for accredited investors. Unfortunately, that rules out the average trader, but it leaves the door open to a large amount of institutional money. In Canada, there are a handful of criteria to become an accredited investor. These are individuals registered as an adviser or dealer by securities regulators, a person who beneficially owns financial assets in the amount that exceeds $1,000,000 before taxes, or a person whose net income before taxes exceeded $200,000 or $300,000 in each of the 2 most recent calendar years. While most regular investors probably don’t meet the requirements, the new fund certainly bridges a gap for institutions that want access to the BTC market.
Institutional Money Starting to Flow
Without an ETF or approved financial vehicle, institutional investors had their hands tied when it came to crypto markets. A handful of hedge funds have access to the markets, but major funds – such as pension funds – didn’t have access. Now, these major institutions can give their clients exposure to the crypto markets in a tax efficient manner, almost like a TFSA, which in turn will cause thousands of dollars to flow into crypto markets. This will provide the crypto markets with a much-needed boost given the recent negative sentiment.
Coinbase Joins the ETF Race
While this new Bitcoin fund solves a number of issues for institutional investors, there is still a good chance the SEC will do its best to ban American investors from using it – much like it did the Bitcoin ETN. To counter this, Coinbase has joined the race to launch America’s first Bitcoin ETF. Thanks to its superior KYC and AML procedures, it has a good shot at actually getting approved. We won’t hear from the SEC until early next year about the Coinbase BTC ETF, but many investors are remaining hopeful.
Institutional investors clearly want access to crypto markets and this can be seen from the negative movements markets take when BTC ETFs are declined by the SEC. This new fund gives institutional and accredited investors a way to get BTC action, but it still leaves many investors out in the cold, so it’s certainly not the ideal solution.