As the price of bitcoin continues to tumble this week, the head of Ontario’s securities regulator stands by its decision earlier this year to be the first in the world to give the green light to cryptocurrency exchange-traded funds.
During a keynote speech on Wednesday afternoon, Grant Vingoe, chief executive officer of the Ontario Securities Commission, said that as the industry continues to grapple with a number of unregulated dealers of crypto assets operating in the market, now was the “right time” to approve cryptocurrency ETFs, which are sold by regulated investment firms.
“The evolution of the ETF discussion in Canada did give us ultimately the comfort that we should proceed with those [cryptocurrency] filings,” said Mr. Vingoe, who was speaking at a virtual event hosted by the Canadian Club of Toronto.
“Major accounting firms were now auditing the holdings, the particular ETF providers had custody solutions that address many of the problems discussed and also bringing crypto assets into a regulated channel – where ETFs can be purchased through registered dealers, with regulatory oversight – is a better alternative than to have completely unregulated activities.”
Bitcoin is a digital currency that is not backed by any country’s central bank. First launched in 2009, the cryptocurrency spiked in popularity in 2017 after reaching US$20,000 before plummeting more than 85 per cent in 2018.
Investor interest in bitcoin resurfaced this year as the price continued to hit all-time highs – reaching US$63,000 last month. But the digital currency is also known to be highly volatile, with price swings of more than 30 per cent in one day.
During bitcoin’s surge in 2017 and early 2018, both Canadian and U.S. ETF companies went head-to-head trying to launch North America’s first bitcoin ETF. At the time, several Canadian asset managers submitted filings to regulators in the hope of launching bitcoin ETFs, but none of the companies received regulatory approval from the OSC.
Earlier this year, Purpose Investments Inc. and Evolve Funds Group Inc. became the first two money managers to be cleared by regulators to launch the world’s first bitcoin exchange-traded funds.
But for ETF companies in the United States – many of whom thought the move by Canada’s regulator would push the U.S. market to follow suit – the waiting game continues. In a regulatory statement last week, the U.S. Securities and Exchange Commission cautioned investors against the “highly speculative investment” and said it would continue to monitor the bitcoin futures market – which does not directly trade in bitcoin but is a type of derivative that allows investors to speculate on what a price will be at a later date. The SEC said it “believes at this time that investment in the bitcoin futures market should be pursued only by mutual funds with appropriate strategies.”
“As such, investors should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market,” the SEC wrote.
While the SEC has not approved any bitcoin ETF filings, it said it was open to “further input” from ETF companies, particularly in regard to compliance issues.
When asked if he expects the SEC to eventually give the green light to cryptocurrency ETFs, Mr. Vingoe was optimistic.
“The SEC is facing the same issues that we did – and I can’t speak for them and the issues being in flux – but for the really liquid crypto assets I would expect worldwide, including at the SEC, for that to change over time,” he said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.