Canada to be as tough as US on ICOs
If ICO and ITO issuers are hoping for an easier time in Canada, they will be sadly mistaken. Unlike the US, Canadian securities laws fall under the purview of the country’s provinces. While there is a centralized authority – the Canadian Securities Administrators – that connects all the provincial regulators, each province can have its own set of laws in relation to securities.
How Does This Impact ICOs and ITOs?
Last year in August, the Canadian Securities Administrators sent out a staff notice to all provincial regulators, stating that coins or tokens could still be defined as securities as described in the Canadian securities legislation. This notice confirms that Canada is taking the same route as the US in deciding whether a specific investment is a security or not.
It seems that provincial securities regulators are going to take the same hard stance on assessing whether cryptos are securities or not. Additionally, there is now news that regulators in multiple provinces will be launching investigations into ICOs – just like the Securities and Exchange Commission in the US is doing.
ICOs Being Given Exemptions by Provincial Regulators
People might argue that at least in Canada, ICOs have the luxury of being given relief from dealer registration stipulations (as detailed in the securities laws) when the ICOs were being offered as securities. What is not mentioned is that this relief is very little and usually the restrictions placed on trade are so constrictive that it is not worth it.
A prime example of this is the Impak Finance Inc. case. In August of 2017, Impak Finance Inc., a responsible investing startup, along with its ICO was given regulatory relief from certain registration requirements by Quebec’s securities regulators, Autorité des Marchés Financiers.
However, the terms of the relief granted were stringent. Purchasers in the ICO were not allowed to buy more than $2,500 worth of tokens without an in-depth KYC and suitability review being conducted on the said buyers. Additionally, Impak was restricted from listing or trading its coins on any of the cryptocurrency exchanges without prior approval being granted by the state regulators.
Added to this is that coins in ICOs are subjected to resale restrictions that impose a pretty stringent hold period where no trading in the crypto is allowed – unless certain really strict criteria are adhered to.
The one silver lining to this stringent web of regulations is that under Canada’s securities laws, a person only needs to register a dealer if they are in the business of dealing with securities.
Overall, the advice of experts is that people should be cautious when promoting an ICO in Canada or they could run afoul of the country’s numerous securities laws.