Token Offerings: Caution And Advice From Securities Regulators

Companies contemplating a token offering should consider the guidance published by Canada's securities regulators on June 11. The guidance in Staff Notice 46-308¹ sets out factors to consider in determining whether securities laws may apply to a token offering. The regulators cautioned that they are actively monitoring token offerings to identify potential violations of securities laws. The bottom line: the staff notice leaves limited scope to structure a token distribution outside the securities regulatory framework. At the same time, the regulators are seeking to encourage innovation and they recognize that fintech businesses may not fit neatly into the existing securities law framework. As such, the regulators invite inquiries from businesses about using the Regulatory Sandbox²—an initiative launched in 2017 aimed at supporting fintech businesses in the interpretation and application of securities laws to innovative products and structures.