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Canadian firms are vying to launch the world's first Bitcoin exchange-traded fund but regulatory hurdles and structural problems are slowing things down, according to one fund's chief executive officer.

"Everybody seems to be commenting that we might be the first in the world but I think we've still got a long way to go with the regulators," said Raj Lala of Toronto-based Evolve Funds Group Inc., which has been branching out into thematic ETFs such as automobile innovation, cybersecurity and gender diversity.

Earlier this month, the U.S. Securities and Exchange Commission ordered about a dozen Bitcoin ETF filings to be withdrawn and asked the industry to answer 31 questions relating to security, liquidity and valuation that it says need to be cleared up before any funds can be started.

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This delay will probably allow Canadian funds to beat their U.S. counterparts to market, and Evolve is in "the pole position to win the race," Bloomberg Intelligence analyst Eric Balchunas said Monday.

Structural Issues

Toronto-based Purpose Investments Inc. has also filed regulatory documents to begin an ETF based on Bitcoin futures contracts, while Horizons ETFs Management Canada Inc. is "aggressively looking at the space," said co-CEO Steve Hawkins.

"We have significantly more experience than some of the new entrants coming into the market who have never done this before," Mr. Hawkins said. "I do not believe for us that we would have any difficulty if we created a bitcoin ETF."

Purpose declined to comment.

Mr. Lala said he'd be surprised if his proposed fund starts this quarter. He's waiting for regulatory approval from the Ontario Securities Commission, and, even if that's granted, structural issues could still get in the way.

Only three futures commission merchants (FCMs) have signed up to trade Bitcoin futures, and Mr. Lala said there should be at least 10. FCMs handle orders and extend credit to customers whose requests are accepted.

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"In the U.S., people are not really solving for the structure because they've got regulation issues, so what's the point in trying to figure out the structural when it's a non-starter to begin with?" he said.

'Big Guys'

Ideally, Mr. Lala said he'd like to see JPMorgan Chase & Co. sign up since most Canadian banks use the New York-based firm as their FCM.

"We really need the big guys to sign up, to legitimize it and to make it a little bit easier to structure," he said.

JPMorgan CEO Jamie Dimon has said he regrets calling Bitcoin a "fraud" and threatening to fire any trader who bought or sold them for being "stupid." Still, he's said he's not particularly interested in the subject, indicating the bank is in no rush to wade into the market. A spokesman for the bank declined to comment.

Morgan Stanley has been clearing Bitcoin futures contracts for big institutional clients, Chief Financial Officer Jonathan Pruzan said last week, joining Goldman Sachs Group Inc. as the only major Wall Street firms to offer the service to clients.

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