How the Emirates joined the Bitcoin ETF system

The first Bitcoin fund in the Middle East was launched in Dubai this summer, when Canada’s largest digital asset investment fund, 3iQ, placed its public ETF in the largest Middle Eastern financial market. Investors can now transfer shares from the Toronto Stock Exchange to Nasdaq Dubai and vice versa, as well as buy them directly on Nasdaq Dubai.

Canada was one of the first countries where Bitcoin ETF got approved by the financial authorities. 3iQ is not only one of the largest cryptocurrency companies in Canada – in January 2018, it also became the first cryptocurrency fund (with a level of almost $ 2 billion) to be regulated by the Ontario Securities Commission and Canadian Securities Administrators. Then, in 2020, 3iQ moved up a notch, becoming the first Canadian company to launch a public bitcoin fund on the Toronto Stock Exchange.

In February 2021, Canada was the first in the world to approve a bitcoin-based exchange-traded fund on a national level. In April, the country’s regulators permitted launching similar products based on Ethereum.

Then, in the spring, the 3iQ Corp asset manager announced the launch of the 3iQ CoinShares Bitcoin ETF (QBTCu.TO), their own bitcoin-based exchange-traded fund. The listing of this financial tool took place on April 19 on the Toronto Stock Exchange. It is traded in Canadian dollars under the ticker BTCQ and in US dollars under the ticker BTCQ.U.

The crypto community has long been waiting for such funds (the first ETF pegged to Bitcoin was the Purpose Bitcoin ETF, also launched in Canada at the beginning of the year). So it’s not at all surprising that as soon as they got started, the international expansion followed. Early on, on April 20, 3iQ received permission from local regulators to launch a bitcoin fund listed on the Nasdaq Dubai exchange. QBTCu.TO, also listed on the Toronto Stock Exchange, became the first cryptocurrency-based index financial tool in the Middle East.

“The idea is that bitcoin is traded 24/7, so we are interested in bringing a regulated product to the Dubai market during its business hours, – Fred Pye, the head of 3iQ, emphasized. – Nasdaq Dubai listing will help meet the demand for investment diversification in the region, as well as environmental, social, and governance (ESG) standards, regarding, for example, pension funds and family offices.”

Although for 3iQ itself, expansion into the largest financial center in the Arab world means, first of all, the opportunity to double the volume of fund-managed assets by 2022, bringing it to over $ 3 billion.

According to Fred Pye, 3iQ is already in talks with exchanges in Singapore, Sweden, and the United States and hopes that its bitcoin fund will be listed on those markets as well. It would allow the Canadian company to keep up round-the-clock trading in the highly financially-intensive markets across the globe.

Abdul Wahed Mohammed Al Fahim, Chairman of Nasdaq Dubai, said at the opening of the first QBTCu.TO trading: “Nasdaq Dubai, a MENA region leader in capital market transformation, is committed to maintaining the highest international standards and best practices for the benefit of market participants. We are confident that our comprehensive exchange environment provides us with excellent opportunities to attract additional listings, be it traditional capital markets issues or alternative investment vehicles.”

To be fair, it is worth noting that quite some time passed between obtaining permission and the start of operations. The 3iQ CoinShares Bitcoin ETF began trading on Nasdaq Dubai on June 23 at 10:00 am Dubai Time (stock symbol: QBTC). It was a historic moment: the first digital asset foundation officially launched in the Middle East and North Africa. And for Dubai, it confirmed its status as a city that supports business in the new economy and the growth of investments, acts as the driving force behind the capital market transformation.

Technically, this is not a direct investment in cryptocurrency, rather a convenient alternative. The 3iQ-managed fund offers investors indirect access to the first cryptocurrency by trading their shares in a regulated and transparent exchange environment. However, that format of working with crypto finance is still unfamiliar to the Arab region. One reason being the fact that based on the principles of Sharia law, financial activity considers the measure of value to be gold. Moreover, Islamic financial rules assume the absence of gharar (uncertainty or excessive uncertainty) in contracts, which is why derivatives (e.g. exchange-traded options) have only recently

The application of Sharia law to cryptocurrencies is its own separate issue. On the one hand, cryptocurrencies are not backed by real assets, their value rises and falls, including through speculative transactions, which is unacceptable for the Islamic world. On the other hand, the positive experience of some countries, such as the UAE, shows that cryptocurrencies can be backed by tangible assets – including gold. It means that stablecoins are allowed… However, the 3iQ CoinShares Bitcoin ETF does not work with stablecoins but with original Bitcoin. Its entry into Nasdaq Dubai, therefore, is a bold step primarily for the Arab stock exchange itself. (Note: Nasdaq Dubai covers the United Arab Emirates and the rest of the Gulf Cooperation Council (GCC), the Middle East and North Africa, Turkey and the Indian subcontinent.)