The resounding success of the first Bitcoin fund shows who leads the ETF market

THE The resounding success of the first Bitcoin exchange-traded fund came as no surprise to cryptocurrency fans. But if they don’t know about ETFs, the location may have been surprising.

The explosive debut of Bitcoin ETF (BTCC ticker) goal, whose turnover approached $ 400 million in shares in two days, did not happen in the biggest ETF market. Nor was it in Europe, where similar products traded on the stock exchange have already accumulated about $ 6.5 billion in assets, according to data compiled by Bloomberg.

In fact, it was in Canada – where the stock market is only 8% the size of the US and assets in ETFs total about $ 215 billion – less than the SPDR S&P 500 ETF Trust (SPY) on their own. It doesn’t register much beyond the ETF industry, but Canada has quietly built a reputation for this type of scam.

“Canada has long been ahead when it comes to ETF product development,” said Ben Johnson, global ETF research director at Morningstar Inc .. “From the listing of the first ETF to, more recently, if home to the first psychedelic ETF. ”

BTCC launched on Toronto Stock Exchange on Thursday, the the first such fund in North America and the first anywhere to bear the ETF label. A day later, Evolve Fund Group’s Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of around US $ 14.5 million in shares.

As with many areas of innovation, deciding who or what was first in the financial world may be a definition, but most agree that the Toronto 35 Index holding fund, or TIPs, was the first iteration of a modern ETF in 1990. Although it did not enjoy the astronomical growth of the US industry – which began with the launch of SPY in 1993 – Canada’s ETF market often features products that have not been tested anywhere else.

The reason comes down to a more agile and liberal regulatory environment and a focus on innovation. The Evolve fund, for example, was approved less than a month after an application was initially submitted.

“Canada has proven that it has a process that leads to innovation and the systems that allow it,” said Som Seif, executive director of Purpose Investments.

In the United States, the Securities and Exchange Commission rejected several Bitcoin ETF requests, citing concerns that prices can be manipulated and liquidity is insufficient. This left investors investing money in the Grayscale Bitcoin Trust (GBTC), a more risky and expensive structure that is often traded at large premiums in relation to the value of its underlying assets.

“Canadian regulators seem much more willing to embrace innovation,” said Nate Geraci, president of ETF Store, a consulting firm.

Read More: The $ 6 trillion ETF revolution started 30 years ago in Toronto

None of this is to say that the ultra-rich, highly liquid US market does not innovate. The first of a new ETF format that hides its holdings against pre-financing – called non-transparent active funds – was launched in the United States in April 2020.

“Canada is ahead of us in some cases, but there are cases where the US is ahead,” said Ben Slavin, head of ETFs at BNY Mellon Asset Servicing. “I wouldn’t necessarily generalize the United States is always behind, it’s just that Bitcoin is an incredibly hot topic and can be a special case.”

Meanwhile, many industry watchers would argue that Canada is not really the first to reach the Bitcoin ETF. In Europe, there are several ETPs that behave in almost exactly the same way, the largest of which has been on the market for more than five years. Regulatory differences only result in a different label.