The British Columbia Securities Commission (BCSC) has granted the first registration of an investment fund manager in Canada solely dedicated to cryptocurrency investments.
First Block Capital Inc has now been registered as an investment fund manager and an exempt market dealer in order to operate a bitcoin investment fund.
“Cryptocurrency investments are a new and novel form of investing in Canada. We have seen from the market and from investors that there is a strong appetite for access to these kinds of investments,” says Zach Masum (pictured), Manager, Legal Services, Capital Markets Regulation, and leader of the BCSC’s Tech Team. “This first registration allows access to bitcoin investments, while providing the BCSC with unique mechanisms to monitor operations in a rapidly developing area.”
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.
The conditions of registration imposed on First Block Capital 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. First Block Capital is also now registered as an investment fund manager and exempt market dealer in Ontario; the BCSC is its principal regulator.
“We strongly encourage other companies in British Columbia, whether they are potential new registrants or existing investment fund managers, to contact the BCSC’s Tech Team if they are considering pursuing cryptocurrency investments in their funds,” says Masum. “The Tech Team can help ensure compliance with securities regulation, which can help save time and potential costs later on.”
The BCSC launched the Tech Team in January 2017 as part of its fintech outreach initiative to help B.C.-based fintech and technology companies understand their securities regulatory requirements. The Tech Team is also actively involved with the Canadian Securities Administrators’ Regulatory Sandbox Initiative, which supports fintech businesses seeking to offer innovative products, services and applications in Canada.
The Tech Team will continue engaging with key stakeholders, and anticipates issuing a publication later this year summarising results of its outreach and proposing next steps to meet the needs of B.C. financial technology industry participants.