On January 16, the Canadian Securities Administrators (CSA) published Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets (Crypto Guidance). The Crypto Guidance is the latest in a series of publications intended to help the emerging crypto industry understand when securities legislation applies to their business models. (See, for example, our March 2019 article on regulatory approaches to crypto-asset trading platforms and our June 2018 article covering the CSA’s guidance on token offerings.)
The major takeaways from this new publication are as follows:
- Most forms of tokenized crypto assets that carry voting rights and/or rights to receive dividends will almost always be considered a security and subject to applicable securities laws.
- One of the key determinations of whether a crypto platform is subject to securities laws is whether crypto assets traded on the platform are immediately delivered to the purchaser, with “ownership, possession and control” resting with that purchaser upon that purchaser. This means that services that provide custody functions on their crypto platform likely have to comply with applicable securities laws.
If you would like to further understand the implications of the Crypto Guidance, please contact your usual lawyer at AUM Law.
January 31, 2020