Canadian asset managers are racing to launch the world’s first cryptocurrency exchange-traded fund to track the price performance of Ether now that regulators have given several investment funds the green light.
On Friday, Purpose Investments Inc., Evolve Funds and CI Global Asset Management were all cleared by the Ontario Securities Commission to launch the first set of ETFs to invest directly in the digital asset, currently the world’s second-largest cryptocurrency by market capitalization, behind bitcoin .
Neither bitcoin nor Ether – the cryptocurrency of software platform Ethereum – is backed by any country’s central bank. They both typically trade through online exchanges, are stored in various cryptocurrency wallets and make use of blockchain, a transparent, distributed ledger technology.
Ethereum was developed in Canada in 2013 and currently has a market capitalization of more than $278-billion. The launch of an ETF will open the door for retail investors to access the cryptocurrency without having to use a digital wallet, which at times can charge additional fees.
In addition to the three aforementioned asset managers, 3iQ Corp. filed a preliminary prospectus for an Ether ETF on March 1 that is pending approval.
Now, the race to launch on the Toronto Stock Exchange could see multiple Ether funds begin trading on the same day. All three companies have reported April 20 as the first day of trading.
Earlier this year, the Purpose Bitcoin ETF gained first mover advantage when it hit the market the day before Evolve Funds Group Inc.’s Bitcoin ETF . Investor interest soared between the two funds, which saw more than $1-billion change hands in the first week of trading.
Purpose hopes it can see similar success with the Purpose Ether ETF, which will trade under the ticker ETHH and charge a management fee of 1 per cent. The company built the ETF alongside Ether Capital, which has an agreement with Purpose to provide consulting services on digital asset investment products.
“We’ve always had a strong vision for what Ethereum ultimately will become, and this is much more where my heart has always been around what crypto can ultimately become in the long run,” Purpose founder and chief executive officer Som Seif said in an interview. “While bitcoin tends to get a lot of attention, as it was the first major cryptocurrency, what Ether and the Ethereum ecosystem represent is one of the most exciting new technology visions today in society.”
Similar to some bitcoin ETFs, and physically backed gold or silver products, all three ETFs will be backed directly by Ether holdings.
Evolve CEO Raj Lala said that much like the ease of buying a bitcoin fund, investors will be able to trade Ether as simply “as buying shares through their bank or brokerage.”
Evolve’s ETF, the Ether Fund, will trade under the ticker ETHR, while the CI Galaxy Ethereum ETF will trade under ETHX.
Both Evolve and CI are looking to launch funds with management fees lower than 1 per cent, matching the fees charged by their bitcoin ETFs – 0.75 per cent and 0.40 per cent, respectively.
“ETHX is CI’s latest step in building an industry-leading suite of cryptocurrency mandates that allow investors to gain exposure to this exciting, growing asset class through an accessible and secure structure at a very reasonable cost,” said Kurt MacAlpine, the chief executive of CI Financial, the parent company of CI GAM, in a statement.
CI GAM will manage ETHX, while Galaxy Digital Asset Management serves as the sub-adviser.
All Ether holdings will be kept in “cold storage” – an offline custodian that cannot be hacked. Gemini Trust Company LLC will be the sub-custodian for ETHH and ETHR, while CIBC Mellon Global Securities Services Co. will act as the fund administrator for ETHH.