ICOs May Be Subject to Canadian Securities Laws
The Canadian Securities and Exchange Commission (CSA) has issued a statement outlining regulatory concerns regarding Initial Coin Offerings (ICOs) that may fall under securities laws. The CSA, an umbrella organization comprised of Canada’s thirteen key provincial financial regulators, has expressed its belief that many tokens distributed via ICOs fall under the legal classification of securities.
The Securities Authorities of Canada has issued a statement outlining the regulator’s belief that many ICO token sales may fall under the legal classification of securities. As such, certain ICOs will be required to adhere to Canadian securities laws.
The CSA says that cryptocurrency offers can provide new opportunities for companies to raise capital and for investors to access a wider range of investments. However, they can also raise investor protection concerns, due to issues around volatility, transparency, valuation, custody and liquidity, as well as the use of unregulated cryptocurrency exchanges. The CSA is particularly concerned that “investors may be harmed by unethical practices or illegal schemes, and may not understand the properties of the investment products that they are purchasing.
CSA states that many of these cryptocurrencies offerings involve securities sales and that Canadian securities laws will apply if the person or company selling the securities is doing business from Canada or if there are Canadian investors. It notes that ICOs may also be derivative and subject to derivative laws adopted by Canadian securities regulators, including trade disclosure standards.
Echoing the recent sentiments noted by the Securities and Exchange Commission of the United States, it seems that the CSA is defining ICOs that issue securities as companies that issue chips corresponding to the future development of a platform or utility, with ICOs that distribute Tabs associated with the facilitation of an already developed system. Possibly exempt from Canadian securities law. If an individual buys coins/chips that allow him/her to play video games on a platform, the values may not be involved. However, if a person buys coins/chips whose value is tied to future profits or a company’s success, they are likely to be considered values.
The Canadian regulator has emphasized its desire to balance promotion innovation while providing consumer protection to users of cryptocurrency. “We welcome digital innovation and recognize that fintech’s new business may not fit perfectly into the existing framework of securities law.” The CSA also states that “investors may also have civil remedies against persons or companies that fail to comply with securities laws, including a right to withdraw from the transaction and/or damages for losses on the grounds that such transactions were conducted in breach of securities laws.”
The CSA statements are intended to warn the ICOs in advance so that they can request independent advice and ensure full regulatory compliance. Although the CSA’s statements do not explicitly articulate the legal repercussions of ICOs that fail to comply with existing Canadian regulations, the document hints at the regulator’s intention to actively pursue projects that fail to adhere to securities legislation.
Disclaimer: This press release is for informational purposes only. Information does not constitute an investment advice or an offer to invest. The opinions expressed in this article are those of the author, they do not necessarily represent infocoin views and should not be attributed to Infocoin.