Canadian Securities Administrators (CSA) today published CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens, which provides additional guidance on how securities laws apply to offerings of coins or tokens, including ones commonly referred to as utility tokens.
“Since publishing initial guidance, we have engaged with numerous businesses considering token offerings and have found that most of these offerings involve securities,” says Louis Morisset, CSA chair and president, and CEO of the Autorité des marchés financiers, in a release. “Our notice sets out additional guidance based on situations we have seen to date and common inquiries we have received from businesses and their advisors.”
The notice outlines specific situations with potential implications for investment contracts in the context of a coin or token offering. It supplements CSA’s August 2017 publication of Staff Notice 46-307 Cryptocurrency Offerings, which outlines how securities law requirements may apply to initial coin or token offerings, cryptocurrency investment funds and the cryptocurrency platforms trading these products.
“Any business planning to raise capital through an offering of coins or tokens should consider whether it involves the distribution of a security,” says CSA in the release. To avoid costly regulatory surprises, CSA encourages businesses to consult legal counsel to ensure compliance with securities law.
Through its regulatory sandbox, CSA has granted exemptive relief from certain securities law requirements in the context of coin or token offerings that involve the distribution of securities, subject to conditions.
The release says CSA staff will monitor cryptocurrency offerings activity and continue to take action against businesses that don’t comply with securities laws.