Canadian Regulators Say Initial Coin Offerings May Be Securities

Initial coin offerings or "ICOs" have attracted the attention of the SEC, which has indicated that it may consider certain cryptocurrency tokens sold in these ICOs to be "securities," subject to regulation under U.S. law. In a recent Notice to FinTech businesses, Canadian regulators have signaled that they are following suit.

The Canadian Securities Administrators ("CSA"), a group of regional and local securities regulators from across Canada, issued a statement emphasizing that cryptocurrency offerings often involve sales of securities. Recognizing that ICOs "can provide new opportunities for businesses to raise capital and for investors to access a broader range of investments," the CSA noted that these types of offerings raise significant investor protection concerns, "due to issues around volatility, transparency, valuation, custody and liquidity" as well as the potential for investors to fall victim to fraudulent or unethical schemes.