Why Canada Hates ICOs
ICOs raised nearly $4B last year. Who cares? Canada certainly doesn’t. On February 13th, the Canadian Securities Exchange (CSE) announced its plans to release a new platform through which companies can issue Security Token Offerings, or STOs. This platform would be an alternative to companies offering ICOs. Indeed, Canada hopes that this platform will help shut down ICOs within its borders entirely.
Canada’s distrust of ICOs has history. Let’s take a look back at what Canadian officials have said on the subject:
In December 2017, Maureen Jensen, Chair of the Ontario Securities Commission described the ICO marketplace as “crazy” and told people, “don’t jump on the bandwagon.” These ICOs are a “mania” and should be treated as such.
Last week, Jason Roy, the chairman of Canada’s Binary Options Task Force and an investigator at the Manitoba Securities Commission, said to the Times of Israel, “we’re very pleased with Facebook’s decision [to ban advertisements for cryptocurrencies, ICOs, and binary options]. My hope is that Google will enact a similar policy.”
Why does Canada hate ICOs? It’s simple. Unregulated ICOs can harm investors. Questions surrounding token volatility, liquidity, valuation and transparency, and their sale through unregulated exchanges remain unanswered. Often, investors do not understand the nature of what they are buying and purchase tokens simply because of perceived market interest. This leaves them vulnerable to bad actors, collusion, and other unethical practices.
In short, Canada hates ICOs because they lack structure and regulation. If you ask 10 Canadians to define the tokens that are being sold through ICOs, you’d get 10 different answers.
This anti-ICO stance is nothing new for Canada. Back in August 2017, the Canadian Securities Administrators (CSA) released a statement that indicated tokens sold through ICOs were likely securities, and that current issuers should be wary. Lo and behold, 6 months later no one heeded the warning, which brings us to this latest announcement from the CSE.
CSE’s newly announced platform will run on the Ethereum protocol and will “enable securities to be traded, cleared and settled in real-time” according to the website. These securities will be traded in the form of STOs. These tokenized securities can represent equity or debt, and will be subject to regulation from Canada’s securities commissions.
Alongside the announcement, CSE signed a Memorandum of Understanding with Kabuni Technologies for Kabuni to be the first company to issue STOs on the platform (pending Kabuni’s approval from the British Columbia Securities Commission). According to the CSE, this marks “the first time a Canadian company will issue a tokenized security on a regulated Canadian exchange.” This echoes the SEC’s comments in front of US Congress last week, in which Jay Clayton said that to date no ICOs have been registered with the SEC.
So if this new platform is a compliant way to sell security tokens whereas ICOs are not, then what is going to happen to these Canadian companies that have already sold tokens through ICOs? We don’t know, but they could very well face prosecution, or at the very least remediation. Any company that completed a token sale should be watching the CSE very closely to see what further action they take.
This announcement from Canada represents a clear shift in the winds regarding ICOs. Canada is no longer talking the talk; the CSE is finally taking action to attempt to create standardization for security tokens using blockchain technology. Yet another domino falls, and the evidence and public opinion continues to compound into a singular idea: crypto tokens are securities and must be regulated as such.
There must be a standard, and Canada has taken the first steps to its creation.
