Are Icos Legal in Canada
[27] Simon Grant et al., Blockchain & Cryptocurrency Regulation 2020: Canada, Global Legal Insights, www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/canada. The use of cryptocurrencies is permitted in Canada, but is not considered legal tender. Unfortunately, Canada`s attempt to answer questions about how cryptocurrency will be treated with the introduction of the CPA has posed more questions than answers to Canadians. The CPA classifies individuals or organizations that trade “in virtual currencies,” a term not defined in the CPA, as a money services corporation (MSB). [7] The purpose of this classification was to ensure that cryptocurrency users and businesses comply with government anti-money laundering (AML) laws. The legislation not only revealed the government`s concern about the adoption of the new technology, but also sought to synchronize provincial regulations with federal interests. The Financial Transactions and Reporting Centre of Canada (FINTRAC), a federal agency similar to FINCEN in the United States, is trying to correct the asymmetry. FINTRAC helps prevent, detect and enforce illicit financial activities and has been authorized under the PCA`s 2014 amendment to include cryptocurrency in its scope and to subject cryptocurrency users and businesses to the supervision of FINTRAC and PCA regulations. [8] Essentially, this section of the staff notice shows that they do not provide for a one-size-fits-all approach to ICOs. Token sales will be incorporated into existing legal regulations for securities. Legal – do you sell security tokens or utility tokens? This is the most fundamental question you should ask yourself before starting a token offering, as the answer affects every facet of your offering – from the attributes your tokens may have to marketing your tokens and to whom you sell them. It is the analysis process that leads to this response that is crucial for any token issuer. If your tokens are securities, there are strict rules that you must follow, including the form of legal agreements required to properly document the sale, as well as reporting and disclosure requirements after the sale.
Securities rules also extend to buyers of security tokens by limiting a token holder`s ability to resell tokens. While many companies ignored securities laws in the early days of ICOs, whether out of ignorance or deliberate disregard, selling securities brands without complying with securities laws can have serious consequences. Securities regulators can stop your token sale, force you to return the proceeds of the sale to buyers, fine you, and exclude you from future capital raising initiatives. The stakes are too high to start the ICO path blindly. Make sure you have competent legal counsel who can help you determine if your tokens are securities and what that means for your business and its token offering. For companies that want to raise capital and think that a token sale could be just the ticket, here`s an important business consideration and an important legal consideration to consider before putting all your eggs in a crypto basket: An illegal offer of securities cannot be disguised to make it a legal product. A senior official with the Ontario Securities Commission was quoted in The Globe and Mail the same day the notice to staff was published: “What we are trying to do is to raise awareness that just because you called something a coin or token does not mean that it is now a loophole and you can promise great returns to your investors. Don`t provide documentation or make sure that what you`re selling them actually suits them. “The opinion of the staff is interesting, but it is not a legal change. It does not create new rules in Canada, but it does provide some clarity to anyone who wants to understand how Canadian securities law applies to token sales. The global legal context for Staff Advisory 46-307 is an increased regulatory review of token offerings, including the U.S.
Securities Exchange Commission`s report on “The DAO” released last month and the issuance of a regulatory position by the Monetary Authority of Singapore. the Canadian government was not as generous with its classification. [2] Under section 8 of the Canadian Monetary Code, only bank notes issued and minted by the Bank of Canada are legal tender. [3] Since cryptocurrencies are not minted by the Bank of Canada, cryptocurrencies are not legal tender, but are considered goods by the Canada Revenue Agency (CRA). [4] One of the explicit target groups of the Notice to Staff is individuals who operate or plan to use cryptocurrency mutual funds. Pages 5 to 6 contain excellent information on legal compliance measures for the proper management of a crypto fund in Canada. The CSA`s regulatory sandbox (“sandbox”) was created to allow companies to register and/or obtain exemptions from securities requirements through a faster and more flexible process than a standard application. A fintech company or its legal counsel seeking waivers from securities laws should consider informing its local regulator that it wishes to proceed via the sandbox.9 As described in the staff`s opinion, these cryptocurrency offerings have created exciting new opportunities for companies to raise capital and for investors to access a wider range of investments. However, companies and investors interested in entering these areas should consult with legal and investment professionals to ensure that they comply with applicable securities laws and obligations.
