3IQ's $1.45bn Bitcoin Fund set for Nasdaq Dubai listing

Lead manager Dalma Capital will run local offering expected to generate $200m of subscriptions

(FILES) In this file photo taken on January 26, 2020 The photo shows a physical imitation of a Bitcoin in Dortmund, western Germany.  Bitcoin has enjoyed a record-breaking week after electric carmaker Tesla and Wall Street finance giants sparked a goldrush for the world's most popular virtual currency, but bubble fears persist. The cryptocurrency topped $52,000 on March 17, 2021 after investment fund giant BlackRock also confirmed a push into the booming sector. / AFP / INA FASSBENDER
Powered by automated translation

The manager of the world's first Bitcoin fund to trade on a major exchange is to list it on Nasdaq Dubai.

3iQ Corporation, which listed The Bitcoin Fund ETF on the Toronto Stock Exchange in April last year, expects to begin trading the fund in Dubai within the current quarter after gaining approval from the Dubai Financial Services Authority.

"We're aiming for listing in the second or third week of May and trading by the end of May," Frederick Pye, chairman and chief executive of 3iQ told The National, although the timetable remains subject to approval. Listing the fund on a Middle East exchange will also help in terms of trading times, as Bitcoin trades for 24 hours a day, seven days a week, he added.

The Bitcoin Fund began trading on the Toronto Stock Exchange in last year, with $15 million of assets. As of last Friday, it had a net asset value of $1.45 billion, according to the company's website.

Part of this is due to Bitcoin's incredible run-up in value during that period. In the 12 months after the fund's launch, Bitcoin increased almost eight-fold in value from just over $7,300 to more than $57,000.

Last week, the world's biggest cryptocurrency hit an all-time high above $63,000 following the successful listing of shares in Coinbase, the world's second-biggest cryptocurrency exchange by volume. However, a sell-off over the weekend prompted by uncertainty over a potential US regulatory crackdown on cryptocurrencies pushed its value back down to $54,806 on Tuesday at 8.12am UAE time. Bitcoin now has a market capitalisation of more than $1 trillion.

3iQ and its lead manager Dalma Capital are targeting initial subscriptions "north of $200m" for the Nasdaq Dubai listing, Mr Pye said.

"But it can be increased in size. We expect it to be a major offering."

Dalma Capital, based in the Dubai International Financial Centre, will now begin a roadshow that will involve about three weeks of education and marketing of the fund, including a presentation by the Winkelvoss twins, cryptocurrency enthusiasts who provide custody services to 3iQ through their Gemini platform.

Following that, a further three-week book-building process will take place where it will court investors looking to subscribe to the offering, chief executive Zachary Cefaratti said.

"That process will be taking place with us alongside some other institutions that have strong reputations in this region," he said.

Early-stage discussions have generated enthusiasm, especially from banks and wealth managers who have clients that are interested in Bitcoin but who have not been able to offer direct investments through existing exchanges due to regulatory concerns, Mr Cefaratti said.

"What we've seen is there is significant pent-up demand. There are a lot of investors who feel like they've missed out on this huge expansion of wealth that has happened in the rise of Bitcoin.

"Over the last 11 years, Bitcoin has been the best-performing asset class in nine of them. People in this region have felt like they've been on the sidelines because they haven't had access to a product. The concern some people have had is whether it's too late. But what we're seeing is it's still very early. Institutional adoption has only just begun."

A number of regulators across the world have continued to express regulatory concerns about Bitcoin as well as some of the unlicensed funds used to promote cryptocurrencies. The UK's Financial Conduct Authority has prohibited trading in cryptocurrency derivatives, while Turkey last week banned their use entirely. India is also reportedly considering a veto.

In the US, at least eight applications have been filed to the Securities and Exchange Commission to list Bitcoin exchange-traded funds by managers including Fidelity, Wisdomtree and First Trust/Skybridge but none have been approved. A Bitcoin Investment Trust run by Grayscale Partners, which is not exchange-traded, now has more than $40bn of assets under management, for which it charges a 2 per cent annual fee, potentially generating $800m a year for the company.

Bitcoin ETFs "need to come", if only to reduce the fees investors pay to access the cryptocurrency through a regulated platform, Charles-Henry Monchau, chief investment officer of Geneva-based digital bank Flowbank said.

Last week's listing of Coinbase initially gave it a $100bn market capitalisation, greater than New York Stock Exchange owner International Exchange ($68bn) and Nasdaq ($26bn), However, a sell-off since has reduced its value to about $66bn as of Monday.

The enthusiasm for the company shows that institutions are beginning to take cryptocurrencies and the blockchain technology on which they are built more seriously, Mr Monchau argued.

The Binance exchange has already tokenised Tesla shares allowing for round-the-clock trading, he added.

"The banks need to do something because they are not taking advantage of the crypto mania," Mr Monchau said. "And if these guys start to tokenise shares, they will eat their lunch."