The Securities Commission granted an exemption to the Filer, on behalf of the Existing ETFs and any future exchange-traded mutual funds managed by the Filer or its affiliate, from subsection 9.4(2) of National Instrument 81-102 Investment Funds (NI 81-102). This exemption allows the ETFs to accept digital assets, specifically bitcoin or ether, as in-kind subscriptions for fund creation units.
The key reasons for this decision include:
1. The ETFs’ investment objective is to provide exposure to digital assets, and they hold most of their assets in bitcoin and/or ether.
2. Subsection 9.4(2) of NI 81-102 typically restricts mutual funds from accepting anything other than cash or securities as subscription proceeds. Digital assets do not fall under these categories.
3. Allowing in-kind subscriptions using digital assets will likely result in the trading price of the ETFs’ listed securities being more closely aligned with the ETFs’ net asset value per listed security.
4. The digital assets used for in-kind subscriptions will be valued according to the ETFs’ disclosed valuation principles in their latest prospectus.
The exemption is subject to conditions, including that the digital assets must be acquired from a regulated source and delivered directly to the ETF’s digital wallet at its custodian or sub-custodian.
The decision is based on the test set out in the Legislation, which the principal regulator found to be satisfied. The Ontario Securities Commission is the principal regulator for this application, and the Filer has indicated reliance on section 4.7(1) of Multilateral Instrument 11-102 Passport System in various Canadian jurisdictions.