CSA Publishes Business Plan, Includes Key Crypto-Asset Issues

On June 13, 2019, the Canadian Securities Administrators (“CSA”), a national organization committed to harmonizing securities regulation across Canada,  published the CSA Business Plan 2019-2022 (“Plan”) outlining initiatives to better assist participants in the capital market industry.  Most notably, the Plan identifies as its Strategic Goal #6 “Respond[ing] to technology-related emerging regulatory issues”. This includes the goal of increasing Canadians’ awareness of policy issues pertaining to cryptocurrency in the context of emerging technology.

Emerging technologies often create regulatory challenges because of unknown implications of the technology itself, coupled with the lack of regulatory clarity. Market participants are often affected by shifts in market conditions, investor demographics, technological innovations, and globalization.

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The Cryptopia Exchange Insolvency and the Importance of Data Assets

It will come as no surprise that the insolvency of a cryptocurrency exchange can lead to concerns about the recovery of assets (just think about the recent insolvency of the Canadian exchange, QuadrigaCX). The recent insolvency of Cryptopia Limited (“Cryptopia”), a New Zealand-based cryptocurrency exchange, is a good example of how these concerns can play out.  It demonstrates the importance of taking steps (both in advance of insolvency, and afterwards) to protect the assets of an insolvent exchange – in this case, to preserve data assets consisting of user account information held by a third party in another jurisdiction that the liquidator needed  to determine the owners/potential creditors of millions of cryptocurrency tokens held by the insolvent company.

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NextBlock Global Limited and CEO to Pay $1M for Misleading Investors

On May 13, 2019, the Ontario Securities Commission approved a settlement agreement in the matter of NextBlock Global Limited (“NextBlock”) and its Co-Founder and CEO, Alex Tapscott. The settlement agreement acknowledged that Mr. Tapscott and NextBlock violated subsection 122(1)(b) of the Securities Act by making false representations in an offering memorandum used to solicit investors.

Background

NextBlock was launched in 2017, and raised $20 million via convertible debentures – a type of debt instrument – to invest in blockchain companies. In order to solicit funds from investors, Mr. Tapscott and other NextBlock principals claimed that as many as four prominent individuals in the blockchain industry were serving as advisors to the firm.

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It’s a bird! It’s a plane! It’s a security in the form of a digital asset!

On April 3, 2019, the U.S. Securities and Exchange Commission (the “SEC“) released guidance outlining whether a digital asset is a security, and thus subject to scope of federal securities laws (the “Framework“). This guidance was introduced to assist participants in the digital asset space with determining whether federal securities laws are applicable to the offering and sale of such assets. The application of securities laws to digital assets will increase obligatory disclosure requirements and compliance costs for issuers in this space.

Although this guidance was issued within the context of the U.S. securities laws, the discussion surrounding legislation of digital assets crosses jurisdictional boundaries.

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No Pressing Need For Central Bank-issued Digital Currencies

Readers may remember the Spring and Summer of 2018 as the heady days of the Initial Coin Offering (“ICO”) boom. With money seemingly printed out of thin air, there appeared to be a token for every occasion. Then, as quickly as it had arrived, the boom seemed to evaporate, taking with it the billions of dollars companies had raised.

But this blog post isn’t about the fast and furious world of crypto-trading and investing. It’s about the staid and steady world of central banking, where central bankers carry on controlling money supply and conducting monetary policy. And giving speeches to other central bankers – including a March 22nd speech by Agustin Carstens (General Manager, Bank for International Settlements[1]) to the Central Bank of Ireland.

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Why bankers and lawyers need to understand blockchain and smart contracts

This article will discuss (i) how blockchain and distributed ledger technology (“DLT“) and smart contracts will reshape the corporate lending space throughout the world; (ii) practical examples of near-term opportunities for the financial community to leverage this technology in a meaningful way; and (iii) the new roles that bankers and lawyers can play when using this technology.

Blockchain and DLT is not to be confused with Bitcoin

When most people hear the terms “blockchain” and “DLT”, they immediately think of Bitcoin and other cryptocurrencies. This is not surprising due to the constant media coverage surrounding the meteoric rise in the value of the cryptocurrency market.

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