Recently, the British Columbia Securities Commission (BCSC) announced (found here) the first registration of an investment fund manager in Canada dedicated solely to cryptocurrency investments. The BCSC granted First Block Capital Inc. registration as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund.
First Block, in partnership with Vancouver crowdfunding portal FrontFundr (Silver Maple Ventures Inc.), had announced in July, 2017 that it would launch Canada Bitcoin Trust, an investment fund designed to allow investors to buy into bitcoin.
In the announcement, the BCSC noted that cryptocurrency investments raise risks that are different from traditional asset classes, including the cybersecurity risks inherent in dealing with digital currencies. These risks relate not only to the registrant, but also to the bitcoin fund's custodian, a third party chosen to facilitate the safekeeping and exchange of bitcoins.
First Block was granted registration pursuant to NI 31-103 under the categories of "exempt market dealer" and "investment fund manager" in both Ontario and British Columbia, with the BCSC acting as the principal regulator. In granting the registration, the BCSC imposed conditions on First Block's Canada Bitcoin Trust because of the unique nature and risks of cryptocurrency investments. First Block will have additional reporting requirements concerning its oversight of the custodians and brokers it uses to buy and hold Bitcoin.
The BCSC noted that the conditions of registration imposed on First Block were crafted to give flexibility to allow them to operate under the present regulatory framework, and give tools to the BCSC to evaluate the identified risks of this innovative fund type.
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