The British Columbia Securities Commission (BCSC) has announced the first registration of an investment fund manager in Canada solely dedicated to cryptocurrency investments. The approval by the BCSC was described as a landmark event. 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.
Zach Masum, Manager, Legal Services, Capital Markets Regulation, and leader of the BCSC’s Tech Team, said that cryptocurrency investments were a new and novel form of investing in Canada and there was strong demand from investors for these types of investments;
“This first registration allows access to Bitcoin investments, while providing the BCSC with unique mechanisms to monitor operations in a rapidly developing area,” said Masum.
The BSCS said that cryptocurrency investments raise risks that are different from traditional asset classes. These risks include cybersecurity challenges 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 said to be 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 with the BCSC as 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,” said 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 BC-based Fintech companies understand their securities regulatory requirements. The Tech Team is also actively involved with the Canadian Securities Administrators’ Regulatory Sandbox Initiative, which was created to support Fintech businesses seeking to offer innovative products and services in Canada.
The Tech Team will continue engaging with key stakeholders, and anticipates issuing a publication later this year summarizing results of its outreach and proposing next steps to meet the needs of BC Fintech industry participants.
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