The Ontario Securities Commission (OSC) has overturned a prior OSC ruling and has issued a receipt for the final prospectus of the Bitcoin Fund (the Fund).
The Manager of the Fund (3iQ Corp.) announced in October 2018 that the Fund, had filed a non-offering prospectus to create the “first regulated Bitcoin fund in the world.” It was structured as a non-redeemable investment fund (NRIF) established under the laws of the Province of Ontario.
An OSC Director’s decision made in February 2019, denied issuance a receipt for the Fund’s prospectus on the grounds that bitcoin was an illiquid asset and did not comply with NI 81-102, Investment Funds and its restriction against holding illiquid assets. The decision was based on public interest concerns regarding valuation, the lack of regulation, and investor protection issues.
In setting aside the earlier decision the OSC Commissioner, Lawrence P. Haber noted that Staff “… has not demonstrated that: bitcoin is an illiquid asset such that the Fund will not be compliant with the restrictions on illiquid assets in NI 81-102.” Haber also overturned the public interest case regarding Staff’s concerns on the integrity of the bitcoin markets, and the Fund’s ability to value and safeguard the bitcoin it holds and file audited financial statements.
Before granting the receipt to the final prospectus, Haber imposed several conditions on the Manager and Fund. These included:
- insurance for Bitcoin stored in hot wallets; and,
- a compromise regarding the methodology and composition of the Fund’s valuation index.
Reasons and Decisions in the Matter of 3iQ and the Bitcoin Fund is available for download from the website of the Ontario Securities Commission.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
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