Canadian regulators: Many ICO tokens are in compliance with the definition of securities


nnn(CSA) issued an employee notice about ICO, noting that many ICOs may be in compliance with the definition of securities and that they need to follow the relevant securities laws. The results of this study are similar to those of the previous SEC for ICO, and it is seen that more and more governments will strengthen the management of ICOs. But CSA also made it clear that its intention is not to hinder the development of this new model, willing to help enterprises with such plans to seek appropriate implementation.n
nnTranslated by: Inan
nCanadian securities regulators issued extensive statements about initial tokens (ICO).n
nThe Canadian Securities Regulatory Authority (CSA) is comprised of local local securities regulators in Canada, and its employees’ notification of “digital currency issuance” provides clear instructions on how regulators can monitor this emerging financing model.n
nIn March, regulators in Ontario had issued a consultation paper on ICO; last month, the Securities and Exchange Commission (SEC) said its regulatory rules could also apply to some tokens.n
nThis announcement from CSA outlines the requirements for companies participating in ICO start-up and management, as well as requests for exchanges that will carry out these asset transactions later. The most noteworthy possibility is that the document shows that the “many” digital tokens investigated by Canadian regulators are in compliance with the securities definition and therefore need to meet a range of legal requirements.n
nThe notice reads:n
nn”Financial technology companies and their legal advisors have consulted us several times on the ICO issue.” According to the tokens issue we have reviewed so far, we have found that these disputed tokens constitute securities in many cases because of their use The purpose is consistent with the provisions of the Securities Act, which is an investment contract, and before we arrive at this conclusion, we also consider the relevant case law – to assess the economic reality of the transaction and to explain the purpose of protecting the investor.n
nnIn the notice, CSA staff pointed out that some ICO sponsors that “tokens should not comply with the Securities Act”, so the token is likely to be classified as securities to its dissatisfaction.n
nCSA wrote:n
nn”However, in many cases, these tokens should be considered as securities in view of all the circumstances of the issue or arrangement, and in assessing whether or not ICOs are applicable, we pay more attention to the substance than the form.”n
nnThe notice also provided guidance for companies seeking to set up an encrypted currency investment fund in Canada. It also invites companies interested in conducting ICO to consider registering a so-called regulatory sandbox that can test new financial products in a particular environment.n
nThe notice states:n
nn”In order to avoid costly regulatory compliance, we encourage companies planning to issue encrypted tokens to contact local securities regulators to discuss how to follow the securities laws.”n
n”We welcome digital innovation, and we know that emerging financial technology companies may not be fully integrated into the current securities law framework.”n

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