Evolve Bitcoin ETF will track the results of continually rolling CBOE-traded futures
Evolve Bitcoin ETF, an Ontario unit trust that has applied to be TSX-listed, proposes to have exclusive exposure to the most current month of Bitcoin futures, except that it will be necessary, as the contract approaches maturity each month, to sell it and purchase the next month’s contract. As the Bitcoin futures trade in Chicago, the Trust will take the position that it will not use the futures or any other property in the course of carrying on a business in Canada and, therefore, will not be a "SIFT trust."
Having said that, it will realize gains on income account each month if the futures keep appreciating (unless it elects under draft ss. 10.1(1) and (4) respecting its “eligible derivatives” to annually recognize income on a mark-to-market basis under s. 142.5(2)). Since it will not make any regular cash distributions, it will need to push out its income in late December of each year (in cash or in units) to the extent of income that has not been allocated on unit redemptions. To facilitate this, it will elect under s. 132.11(1) to have a December 15 year-end (so that income distributions made in the following stub period are back-dated to December 15.) Perhaps this will lead to increased trading surrounding that date.
Units are redeemable at any time at NAV provided that they are tendered in multiples of a specified minimum number (a “PNU”) – but to provide greater certainty on open-ended (s. 108(2)(a)) unit trust status, units in smaller quantities are redeemable at any time at 95% of their trading price. The tax disclosure assumes that the units are capital property to individuals.
Neal Armstrong. Summary of Evolve Bitcoin ETF preliminary prospectus under Offerings – Commodity Funds – Cryptocurrency Funds.