The tough success of the first Bitcoin fund shows who is leading the ETF market

He the squeaky success of the first fund traded on Bitcoin exchange will not have come as a surprise to cryptocurrency enthusiasts. But if you don’t know about ETFs, the site could have been amazing.

The explosive debut of the Purpose Bitcoin ETF (ticker BTCC), whose trading volume reached $ 400 million shares in two days, did not move into the larger ETF market. Nor was it in Europe, where similar products listed on the stock exchange have already accumulated about $ 6.5 billion in assets, according to data collected by Bloomberg.

It was really in Canada, where the equity market is only 8% the size of the US and ETF assets total about $ 215 billion, less than the SPDR S&P 500 ETF Trust (SPY) on your own. It doesn’t register far beyond the ETF industry, but Canada has quietly built its reputation on this kind of coup.

“Canada has long been at the forefront of ETF product development,” said Ben Johnson, global director of ETF research at Morningstar Inc. “From the list of the first ETF to becoming the most recent home of the first psychedelic ETF.”

BTCC was launched at Thursday, the Toronto Stock Exchange first fund of its kind in North America and the first to carry the ETF tag anywhere. A day later, the Evolve Fund Group Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of shares worth about $ 14.5 million.

As with many areas of innovation, deciding who or what was first in the financial world can be defined, but most agree that the Toronto 35 participation fund, or TIPs, was the first iteration of a modern ETF in 1990. While it has not enjoyed the astronomical growth of the U.S. industry (which kicked off with the launch of SPY in 1993), the Canadian ETF market has frequently introduced products that they have not been tested anywhere else.

The reason is due to a more agile and liberal regulatory environment and a focus on innovation. The Evolve fund, for example, was approved less than a month after the initial submission of an application.

“Canada has shown that it has a process that leads to innovation and the systems that enable it,” said Som Seif, CEO of Purpose Investments.

In the United States, the Securities and Exchange Commission has rejected several applications for a Bitcoin ETF, citing worries that prices can be manipulated and that liquidity is insufficient. This has left investors throwing cash at the Grayscale Bitcoin Trust (GBTC), a riskier, more expensive structure that often trades at huge premiums for 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.

Read more: The $ 6 trillion ETF revolution began 30 years ago in Toronto

None of this means that the ultra-rich and highly liquid American market is not innovating. The first of a new ETF format that hides its holdings against front-funning (called non-transparent active funds) which premiered in the United States in April 2020.

“Canada has come a long way in certain cases, but there are cases where the United States is ahead,” said Ben Slavin, head of ETFs at BNY Mellon Asset Servicing. “I wouldn’t necessarily generalize that the United States always lags behind, it’s just that Bitcoin is an incredibly hot topic and can be a special case.”

Meanwhile, there are many industry observers who would say that Canada is not really the first in the Bitcoin ETF. In Europe, there are several FTEs that behave in almost exactly the same way, the largest of which has been traded for more than five years. Regulatory differences only result in a different label.