Proposed Bitcoin Fund will be a long-term holder of bitcoin

The final long form prospectus for the Bitcoin Fund contemplates an Ontario trust whose units will be listed on the TSX and that will invest substantially all of its assets in bitcoin. It will acquire an initial bloc of bitcoin from another fund (with the same name as its manager) potentially on a s. 132.2 rollover basis, so that there was the potential for the acquired bitcoin to have an accrued gain.

It is contemplated that the bitcoin would not constitute non-portfolio property (no SIFT tax). Since the Fund intends to be a long-term holder of bitcoin, it is anticipated that it will treat its bitcoin as capital property. In addition to an annual redemption right at NAV (to be paid in U.S. dollars rather than in specie), there is a monthly redemption right (at a generally discounted redemption price) so that the Fund can qualify as a mutual fund trust. The disclosure notes that proposed s. 132(5.1) might effectively require the Fund to allocate capital gains realized by it on a redemption of unis to non-redeeming unitholders.

Neal Armstrong. Summary of 31 March 2020 Bitcoin Fund prospectus under Offerings – Commodity Funds – Cryptocurrency Funds.