In August 2017, we considered the guidance offered by the Canadian Securities Administrators (CSA) regarding the application of securities laws to the blockchain industry and initial coin offerings (ICOs), primarily as set out in CSA Staff Notice 46-307 Cryptocurrency Offerings.  In that post, we noted that the CSA have provided little guidance regarding when they would consider cryptocurrencies to be securities, and thus subject to Canadian securities rules.

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On August 24, 2017, the staff of the Canadian Securities Administrators other than Saskatchewan (CSA) published CSA Staff Notice 46-307 Cryptocurrency Offerings (the Staff Notice) in response to increased activity within the distributed ledger technology or “blockchain” industry. The Staff Notice provides guidance regarding the application of Canadian securities laws to businesses operating in that industry, in particular those undertaking initial “coin” or “token” offerings (ICOs), exchanges on which those coins, tokens and cryptocurrencies are traded and investment funds that invest in such assets.

The Staff Notice provides that in the CSA’s view many coins, tokens and cryptocurrencies fall within the definition of “securities” under Canadian securities laws. An offering of such tokens would therefore require a prospectus or exemption from prospectus requirements and businesses supporting and operating ancillary to such tokens could be subject to registration requirements. The Staff Notice also provides that such products may also be derivatives and subject to the derivatives laws adopted by the Canadian securities regulatory authorities.

The Staff Notice confirms speculation among industry participants and advisors that Canadian regulators would take this approach, which is similar to the positions articulated by the United States Securities & Exchange Commission and securities regulators in Singapore.

With respect to ICOs, the Staff Notice provides that, from the CSA’s perspective, many of the ICOs completed to date involved the sale of securities and that securities laws in Canada will apply if the person or company selling the securities is conducting business from within Canada or there are Canadian investors in the tokens.

The CSA are aware of businesses marketing their tokens as software products and taking the position that the tokens are not subject to securities laws.  It appears to be the CSA’s view, however, that in many cases, when the totality of the offering or arrangement is considered, the tokens should properly be considered securities.  In assessing whether or not securities laws apply, the Staff Notice states that the CSA will consider substance over form and apply a purposive interpretation to the law with the objective of investor protection in mind.


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On July 25, 2017, the United States Securities and Exchange Commission (SEC) issued a report of investigation (Report) concluding that the digital currency “tokens” sold by DAO (DAO Tokens) in a 2016 initial coin offering (ICO) are securities for purposes of federal United States securities laws. This conclusion could have far-reaching implications for businesses that have completed or are contemplating an ICO, businesses dealing with tokens or cryptocurrencies, such as cryptocurrency exchanges, as well as the still-developing legal landscape relating to ICOs and distributed ledger or “blockchain” technology.

Beginning in 2013, many entities that use blockchain technology as their operational foundation have raised funds through ICOs. While precise data is not available, various sources estimate that since the beginning of 2016, between 84 and 139 ICOs have been completed, raising gross proceeds of between U.S.$281 million and U.S.$1.35 billion.(1) In some cases, ICOs have sold out in a matter of seconds, such as the Basic Attention Token ICO in May 2017 which raised U.S.$35 million in less than 30 seconds.(2)

Pursuant to an ICO, an entity offers digital currency tokens to purchasers, typically in exchange for digital consideration such as Bitcoin or Ether. The rights attaching to these tokens vary greatly, with some resembling “kick-starter” style crowd-funding in that token holders have pre-paid for goods or services offered by the entity and others resembling common shares in a company in that token holders have certain voting rights and certain rights to dividend-like payments from the entity.


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By a press release issued March 8, 2017, the Ontario Securities Commission (OSC) warned businesses that use distributed ledger technologies (DLT), such as blockchain, as part of their financial products or service offerings that they may be subject to Ontario securities law requirements.

The OSC noted that businesses are using DLT in a variety

apple-1853306_1280On March 6, 2017, the Ontario Securities Commission issued a white paper titled “Insights from Canada’s first regulatory hackathon”.  The paper provides an overview of the RegHackTO hackathon hosted by the OSC on November 25-27, 2016.   At the event, more than 120 members of the fintech community competed to find solutions to regulatory problems in

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On January 18, 2017, the United States Financial Industry Regulatory Authority (FINRA) released for comment a report titled Distributed Ledger Technology: Implications of Blockchain for the Securities Industry.

The report provides a helpful overview of distributed ledger technology (DLT) which FINRA describes as involving a distributed database maintained over a network of computers connected