On September 6, 2017, the British Columbia Securities Commission (BCSC) announced that it has granted registration to First Block Capital Inc. as an exempt market dealer and investment fund manager. First Block Capital also possesses the same registration qualifications in Ontario. The investment firm is led by entrepreneurs Sean Clark and Marc van der Chijs.
Previously, the Canadian government has appeared wary of cryptocurrency, especially in the realm of token offerings and ICOs. Last month, the Canadian Securities Administrators issued a staff note raising concerns about volatility, transparency, and investor protection in token offerings (ICOs). At least on the regional level, Canadian financial authorities have warmed to bitcoin. The BCSC is treating First Block Capital’s registration like a testing ground, as mainstream investors begin to foray into cryptocurrency ventures.
“We have seen from the market and from investors that there is a strong appetite for access to these kinds of investments,” said the leader of BCSC’s Tech Team, Zach Masum. “This first registration allows access to bitcoin investments, while providing the BCSC with unique mechanisms to monitor operations in a rapidly developing area."
ETHNews spoke with Masum to understand how the BCSC will monitor First Block Capital. The agency will receive ongoing reports from the fund manager, he said. These regular updates will allow the BCSC to measure several features, including:
- the adequacy of the bitcoin custodians and bitcoin brokers being used by the fund;
- the adequacy of insurance or contingency reserves held to protect investors;
- the volatility and growth of the fund; and
- whether bitcoin purchased and sold by the fund is priced fairly.
The fund manager will also “be subject to periodic compliance examinations, similar to those faced by all other British Columbia-registered companies.” Masum explained that the fund’s performance will have no bearing on future registrations, but “highly detrimental changes to the bitcoin marketplace” (i.e., cyber security threats) could influence how the BCSC considers parameters or restrictions for cryptocurrency investments. It’s worth noting that Masum referred to bitcoin as a commodity throughout his statements.
The BCSC Tech Team, which was created in January 2017, is working closely with other securities commissions as part of a “pan-Canadian” regulatory sandbox initiative. Masum told ETHNews that the BCSC has also corresponded with international counterparts, including the US Securities and Exchange Commission, the United Kingdom’s Financial Conduct Authority, and the Australian Securities Investment Commission.