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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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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