The roaring success of the first-ever Bitcoin exchange-traded fund will have been no surprise to cryptocurrency fans. But if they don’t know about ETFs, the venue might have been startling.
The explosive debut of the Purpose Bitcoin ETF (ticker BTCC), whose trading volume approached $400 million worth of shares in two days, didn’t happen in the largest ETF market. Nor was it in Europe, where similar exchange-traded products have already garnered about $6.5 billion in assets, according to data compiled by Bloomberg.
It was actually in Canada—where the equity market is just 8% of the size of the U.S. and assets in ETFs total about $215 billion—less than the SPDR S&P 500 ETF Trust (SPY) on its own. It doesn’t register much beyond the ETF industry, but Canada has quietly built a reputation for this kind of coup.
“Canada has long been out in front with respect to ETF product development,” said Ben Johnson, Morningstar Inc.’s global director of ETF research. “From listing the first-ever ETF to more recently becoming home to the first-ever psychedelics ETF.”
BTCC launched on the Toronto Stock Exchange on Thursday, the first fund of its kind in North America and the first anywhere to carry the ETF label. A day later, Evolve Fund Group’s Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of about $14.5 million worth of shares.
As with many areas of innovation, deciding who or what was first in the financial world can come down to definition, but most agree that the Toronto 35 Index Participation fund, or TIPs, was the first iteration of a modern ETF in 1990. While it hasn’t enjoyed the astronomical growth of the U.S. industry—which kicked off with SPY’s launch in 1993—Canada’s ETF market has frequently introduced products not tried anywhere else.
The reason comes down to a more nimble 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 filed.
“Canada has proven that it has a process that leads to innovation and the systems to allow for it,” said Som Seif, chief executive officer of Purpose Investments.
In the U.S., the Securities and Exchange Commission has rejected multiple applications for a Bitcoin ETF, citing concerns that prices can be manipulated and liquidity is insufficient. That has left investors plowing cash into the Grayscale Bitcoin Trust (GBTC), a riskier and more costly structure that often trades at huge premiums to the value of its underlying assets.
“Canadian regulators seem much more willing to embrace innovation,” said Nate Geraci, president of the ETF Store, an advisory firm.