Blockchain

Bradmer Pharmaceuticals Inc. (Re), 2018 CanLII 48607 (ON SEC)

10. In conjunction with this intention, on January 9, 2018, approximately US$300 million of assets (Contributed Assets) were contributed to Galaxy LP by Galaxy Group Investments LLC (Galaxy Group), a New York-based family office investment vehicle owned by Michael Novogratz and related family trusts. The Contributed Assets consisted of direct holdings in bitcoin and other cryptocurrencies, equities of companies in businesses relating to blockchain or cryptocurrency, digital token mining and joint ventures, and interests in third-party-managed fund limited partnerships previously acquired by Mr. Novogratz through his family office.

29. The Filer is not including the Required Statements in the Circular for the following reasons:

(a) The Contributed Assets comprised different cryptocurrency- and blockchain-related investments, including cryptocurrency holdings with a liquid trading value, restricted holdings of pre-sold digital tokens, investments in cryptocurrency and blockchain-related funds, venture capital investments and commodity futures positions with a liquid trading value. Most of the Contributed Assets were acquired during 2017 and were held through various branches of the Novogratz family office, including some held personally by Mr. Novogratz, and were not held separately from his other family office assets and investments.

3iQ Corp (Re), 2019 ONSEC 37 (CanLII)

[6] Bitcoin is a novel asset in an emerging and evolving market. It is a risky asset. Markets for novel asset classes and securities evolve over time. Emerging markets for securities and asset classes look and feel very different from mature markets. As markets evolve and mature, they change, either through the efforts of the market participants or through government intervention or regulation, or both.

[10] The Director denied a receipt for The Bitcoin Fund’s prospectus because of concerns about bitcoin, namely: concerns about bitcoin’s liquidity and the integrity of the bitcoin markets, and concerns about The Bitcoin Fund’s ability to value and safeguard its bitcoin and file audited financial statements

[11] The concerns about bitcoin expressed by the Director, and by Staff in this proceeding, are warranted and should be taken seriously. But, for the reasons described herein, those concerns do not warrant denying a receipt for The Bitcoin Fund’s prospectus. An Order will be issued setting aside the Director’s decision and directing the Director to issue a receipt for a final prospectus of The Bitcoin Fund, provided the Director is satisfied that there are no grounds under s. 61 of the Act for the Director to refuse to issue a receipt for any such prospectus, other than the grounds set out in the Director’s decision or these reasons.

[43] Staff submits that a receipt for the Fund’s prospectus should not be issued because bitcoin is an illiquid asset as defined in NI 81‑102. Therefore, the Fund, which would hold bitcoin, would not comply with the restriction against holding illiquid assets in section 2.4 of NI 81‑102.

[44] I do not agree with Staff’s submission and, for the following reasons, I find that Staff has not shown that bitcoin is an illiquid asset, as defined in NI 81‑102.

[47] I find that there is sufficient evidence of real volume and real trading in bitcoin on registered exchanges in large dollar size, both in absolute terms and compared to other markets for commodities and equities, which constitutes a liquid market.

[48] The regulation does not define the term “market facility” that is found in the definition of “illiquid asset”. Staff argues that “market facility” should be interpreted to imply some form of established and mature trading facility or network, in order to promote a robust valuation of an investment fund’s assets.

[49] I disagree and find that Staff’s interpretation of “market facility” is unduly narrow. I agree with the Applicants’ submission that “market facility” is a market that provides sufficient liquidity for disposition of a fund asset and that promotes price discovery for calculating an asset’s net asset value.