There are now a number of blockchain ETFs (exchange-traded funds) available on the Toronto Stock Exchange. ETFs are touted as a safer investment option than, for instance, investing directly into new technology companies. This is because you get more exposure to different assets within one investment.
Canada quickly followed the U.S, where the first blockchain-based ETFs launched on Nasdaq in January 2018. The U.S Securities and Exchange Commission (SEC) has tens more Bitcoin-based ETFs awaiting review, but are reluctant to grant approval until the digital currency market matures.
ETFs made up of blockchain companies have been somewhat easier for regulators like the Canadian Securities Administrators (CSA) to approve. This is because the investment product is based on investments into blockchain oriented companies, rather than blockchain-based assets.
Blockchain-based assets – digital currencies – are a different question for regulators due to their sometimes volatile nature, the transparency of information relating to them, and the difficulty in pinpointing a value to settle an ETF and decide investor returns.
Blockchain-based ETFs on the Toronto Stock Exchange
Harvest Portfolios Group, Inc.
Harvest Portfolios Group Inc, with its Blockchain Technologies ETF, was the first company to offer a blockchain based ETF on the Toronto Stock Exchange. The offering launched February 2018. The product, listed as HBLK, invests in both established companies and emerging businesses involved with blockchain technologies. Its holdings include Hive Blockchain Technologies Ltd, Overstock.com, BTL Group Ltd, and BIG (Blockchain Intelligence Group).
Evolve Funds Group
Evolve Funds Group is another example of a blockchain-based ETF. Their “actively managed” Evolve Blockchain ETF (ticker: LINK) launched on March 6th, 2018.
“Blockchain has the potential to transform business models with endless commercial applications,” said Raj Lala, President & CEO of Evolve ETFs. “The benefits can apply to many sectors, from financial services and mining to the global food industry. Active management in LINK allows us to be nimble and to potentially capitalize on these emerging opportunities.”
First Trust Portfolios Canada
First Trust Portfolios Canada is the latest to launch an ETF in Canada. Titled First Trust Indxx Innovative Transaction and Process ETF (ticker: BLCK CN), it provides exposure to a number of global blockchain companies.
The First Trust Canada Index sits on three tiers of blockchain related companies: those actively developing blockchain technology products and systems, those using blockchain systems and supported by blockchain developers, and those exploring the incorporation of blockchain technology into their business infrastructure. According to First Trust, they re-assesses and re-weighs the three tiers twice a year.
In Canada, Evolve Funds Group Inc and Toronto-based Purpose Investments Inc have both filed applications with the CSA for Bitcoin-based ETFs. Horizons ETFs Management Canada Inc is reportedly investigating the opportunity.
Questions and uncertainty in the market
Hard-forks, hacks, rumours of market manipulation and liquidity all contribute to market uncertainty over Bitcoin-based ETFs. Given this, ETF providers must demonstrate to regulators that they, and the digital currency market, are able to manage issues while protecting investors.
“Until the questions identified… can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products,” stated the U.S SEC in a staff letter on January 18th, 2018.