The CSA Weighs In On Cryptocurrency Offerings

With the increasing popularity of blockchain-based digital currencies, many businesses see them as a unique way to raise funds, while investors consider them to be part of a diversified investment portfolio. Recognizing that securities law may, in some circumstances, apply to these types of investments, the Canadian Securities Administrators (the "CSA") recently published Staff Notice 46-307 – Cryptocurrency Offerings (the "CSA Notice"). Interestingly, the CSA Notice attempts to establish a broad analytical and regulatory framework with respect to (i) cryptocurrency exchanges; (ii) initial Coin/Token Offerings ("ICO/ITOs"); and (iii) cryptocurrency investment funds. More importantly, the CSA Notice makes it clear that in certain circumstances, securities regulators may view cryptocurrencies as "securities" and that dealing in such cryptocurrencies (including operating exchanges or conducting an ICO/ITO) would generally be subject to existing securities law.