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Canadian entrepreneur seeks to list crypto ETFs in New Zealand

Smooth-talking Fred Pye, the chairman and CEO of Canada’s first – and largest – digital asset investment fund, breezed into Auckland late last month to introduce Kiwis to two new crypto funds which were about to be listed on Cboe, Australia’s exchange for alternative investments.

Monday, June 13th 2022, 11:28PM 9 Comments

by Jenni McManus

His company, 3iQ, also hopes to list the funds in New Zealand.

Pye brought with him a slick roadshow that traverses the history of bitcoin, how crypto works and why the technology behind blockchain – the platform upon which bitcoin ‘rides’ – has the potential to change the way the world lives and does business.

In 2020, 3iQ, in 2020 launched the first exchange-traded cryptocurrency fund in North America. “We believe everybody should have a piece of bitcoin in their portfolio,” Pye says.

Trouble is, he says, investment in crypto can be cumbersome and daunting and the market is riddled with jargon and complexity, not to mention volatility and risk. From its high of US$69,000 in November last year, bitcoin is now trading at around the US$28,000 mark.

None of this seems to faze Pye. Bitcoin started life at US$196 in 2013 and was trading at about US$400 in 2016 when 3iQ, was set up. And though the crypto market has plunged by 50% over the past six months (its ‘Lehman moment’, as Pye puts it, he says bitcoin is still worth a look.  Investors who put 3% of their portfolio into bitcoin five years ago would have doubled their rate of return and it is still the best-performing asset class on the planet.

Australians seem keen to invest in cryptocurrencies. A survey by consumer advocacy group Choice shows one in nine Aussies has bought crypto in the past year and Pye says 3iQ’s two ETFs (exchange traded funds) give retail investors easy and inexpensive access to bitcoin and ether (another cryptocurrency).

Nevertheless, accompanying the documentation for the two Australian listings is a warning: “There are risks associated with investing in cryptocurrency-based products. These products are considered very high risk and investors should carefully assess their risk profile and seek their own financial advice before investing.”

The warning comes from Pye himself. Volatility can be extreme, he says, and EFTs tend to track the underlying price of crypto.

On June 7, the 3iQ CoinShares Bitcoin feeder ETF and the 3iQ CoinShares Ether feeder ETF listed on the Cboe exchange. As feeder funds, they give investors access to the underlying 3iQ bitcoin and ether ETFs in Canada which are listed on the Toronto Stock Exchange.

3iQ is only the second crypto business to list an ETF in Australia, hard on the heels of a partnership between Swiss-based 21 Shares and ETF Securities, a London-based business, which in May became the first to debut bitcoin and ether ETFs.

In Pye’s view, the technology behind the Bitcoin blockchain – the platform upon which bitcoin is traded – could prove to be more life-changing than the worldwide web in the late 1980s/early 1990s.

That’s because blockchain can offer the secure transfer of ownership, value, title and money, and do it instantly. “Arguably, the secure value-transfer protocol is more powerful than any other protocol ever created,” Pye says.

Called ‘smart contracts’, the blockchain applications create few barriers to entry, Pye says.  “Your 20-year-old could code one in a weekend.” But unlike the internet, the platform isn’t free. To put that contract (or program) on the blockchain, you must pay the blockchain in its native currency – for example, bitcoin.

Blockchain uses a ledger to keep track of the amount of bitcoin everybody owns. Transactions recorded on the ledger can never be altered and are visible to everyone on the platform, removing the need for trust and third-party oversight. The Bitcoin blockchain is powered by a network of millions of computers that consumes 4% of the world’s energy, Pye says.

With many countries, including New Zealand exploring the replacement of cash with a digital currency, the technology has the potential to disrupt financial services, among other sectors.

“Twenty years from now, companies will not be using 60-year-old technology to market their wares,” Pye says. “They’ll be using something that’s being invented right now, called the metaverse.”

The metaverse (virtual reality) will replace the worldwide web, he predicts. Unlike blockchain, which is secure, the internet facilitates the unsecured movement of information, benefitting businesses like Google, Uber and Amazon which can park their software on a free platform and get very rich.

Pye now heads a business with C$1.5 billion of assets under management. But getting there has been a long haul.

After starting his career as a precious metals’ forex trader, Pye had his first dust-up with regulators in the mid 1980s when he wanted to publicly list gold, silver and platinum certificates. He succeeded in 1986, with the certificates being listed on the Montreal Stock Exchange. He set up 3iQ in 2012, around the time bitcoin started trading.

This led to another skirmish with the regulators, this time with the Ontario Securities Commission, in 2016 when he sought to list his crypto fund on a major Canadian stock exchange.  A three-year battled ensued, ending with a court hearing in 2019 and a decision in Pye’s favour. His bitcoin and ether ERTFs were listed the following year.

Tags: cryptocurrency

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Comments from our readers

On 14 June 2022 at 7:33 am Backstage said:
Can someone explain to me how crypto and investment go in the same sentence? If one was walking into Auckland Casino they would not say I am here to invest! Perhaps i have missed something and should have some snake charmer sell me some lines of code?
On 14 June 2022 at 9:35 am John Milner said:
We already have enough thin air here in New Zealand thank you. Love the concept of blockchain, just not the noise they refer to as crypto currency.
On 15 June 2022 at 6:10 am Pragmatic said:
2 years too late. Most of this sessions ‘dumb money’ has evaporated
On 15 June 2022 at 8:31 am Adviser1 said:
Should probably be a little more open minded to alternative asset classes if you're an investment adviser IMHO.

Emotional, knee jerk responses based on one's own opinions could lead you down the wrong track very quickly. The world is in a state of major change and anything could happen - prepare for that or at least be open minded to it.
On 16 June 2022 at 7:37 am Backstage said:
@Adviser1... explain to me what an "asset" is for it to be an "asset" class. These lines of codes are backed by nothing and open to the breeze. Again, if i walk into a casino i am open minded but extremely aware that i would be a fool to use the word "investment" in my gambling. But, the world is full of mushy headed wishfullness..
On 17 June 2022 at 9:39 am Adviser1 said:
@backstage did you think the internet was just 'lines of code' backed by nothing when it first arrived on the scene? I'm not here to defend Crypto as a worthy asset class but I think it's here to stay in some form or another - just look at the big players involved. I think as an industry we should be a little more open minded to it. Might all be tulips, might not - time will tell I guess. Cheers
On 18 June 2022 at 10:25 am Pragmatic said:
The irony surrounding the massive & sudden drawdown in most crypto values is the lack of trust. Ironically this was the promotional headlines of bitcoin, who encouraged investors not to trust fiat money.
On 20 June 2022 at 3:40 pm Murray Weatherston said:
Assume all 21 million BTC have been coined.
At peak price USD64,800 each in April 2021, market cap was USD 1.36trillion.
What were the assets backing then.
Today price is only USD19,560. Market cap is only 410B.
What has happened to the other $950B that was there 14 months ago. Have any assets disappeared?
What's the valuation model?
My working hypothesis is that the $1.36T market value was never really there, and even the theoretical 410B today is not there either.
Disclosure: my crypto holdings are and have always been zero. I think they will remain zero until somebody educates me as to where the crypto value is.
On 21 June 2022 at 7:42 am Backstage said:
I agree Murray and you did really well. Even if i buy a racehorse, at least i have an expensive pet. Getting left with a handful of code (or magic beans) does not feel right.

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