Lessons From the Canadian Model for a Crypto ETF

This episode is sponsored by Quantstamp and Insider Protocol.

Recent comments from U.S. Securities and Exchange Commission Chair Gary Gensler have reignited the discussion of the future of crypto ETFs in the U.S.

In this week’s episode of “Money Reimagined,” hosts Sheila Warren and Michael Casey dive into the world of crypto exchange-traded funds and their rocky history with U.S. regulatory bodies. Fred Pye, CEO of 3iQ Corp., joins Warren and Casey to walk through 3iQ’s journey to become the first Canadian investment fund manager to offer a public bitcoin investment fund.

An ETF is a vehicle through which an investor can access a diversified portfolio of crypto tokens and coins. Though there are many ETFs covering bonds, stocks, commodities and more available to American investors, the SEC has yet to approve a crypto ETF. The first bitcoin ETF up for consideration was filed in 2013. Since then, 18 applications have been rejected or delayed.

With the U.S. Securities and Exchange Commission seemingly inching closer to approving a narrowly defined version of a bitcoin ETF, Pye’s insights offer some useful lessons learned from the launch of 3iQ’s Canadian dollar- and U.S. dollar-denominated bitcoin fund.

3iQ now manages over $2.5 billion in assets, offering an indication of the kind of money that might flow into the sector if the giant U.S. institutional market were given the opportunity to invest in bitcoin ETFs.

We discuss the work 3iQ did to get regulators comfortable with its price references and the way it structures and manages its funds. There’s something of a square peg-meets-round hole problem with digital assets that trade 24/7, often on unregulated exchanges and with highly volatile moves and social media-driven narratives. But as Pye points out, it’s not the regulators’ job to contain an asset’s volatility. It’s to ensure that what the asset manager is promising is delivered.

So, with that in mind, what will a U.S. ETF mean for bitcoin (and later or ether and other digital assets when these are added to the approved U.S. offerings) if and when it is approved?

Will people own crypto in their 401 (k)s? Will there be a surge of institutional money into bitcoin? Does it matter that the SEC is leaning toward first approving a bitcoin ETF backed not by the underlying bitcoin but by bitcoin futures? And what does that mean for all the spot bitcoin-backed ETF proposals that have been pending approval for what has, for some, been as long as eight years of waiting?

These questions and more, all discussed in this week’s episode of “Money Reimagined.”

-

This episode was produced by Michele Musso, edited by Jonas and announced by Adam B. Levine.

Our theme song is “Shepard.”