Canada: CSA Outlines Canada's Regulatory Approach To Cryptocurrency Offerings And Funds

On August 24, 2017, the Canadian Securities Administrators (CSA) issued Staff Notice 46-307 – Cryptocurrency Offerings. The Notice provides guidance with respect to the applicability of securities laws to:

  • Cryptocurrency exchanges;
  • Cryptocurrency offerings, including

    • Initial Coin Offerings (ICOs)
    • Initial Token Offerings (ITOs); and
  • Cryptocurrency investment funds.

While they clearly have some concerns about awareness of compliance requirements in this area, the CSA also expresses its support for "digital innovation" and urges industry participants to seek regulatory input proactively before entering into new types of cryptocurrency business. Staff recommends the use of the CSA Regulatory Sandbox with respect to novel fintech enterprises of all kinds.

Cryptocurrency Exchanges

Despite money-laundering and anti-terrorism concerns, there is still very little regulation of the world's cryptocurrency exchanges, which offer investors the opportunity to buy or sell cryptocurrencies online. To date, no exchanges of this type have been recognized by Canadian regulators and none have been exempted from recognition. CSA Staff point out that the compliance concerns that arise from this are not limited to the exchanges: coins or tokens to be traded on a cryptocurrency exchange may be subject to resale restrictions under securities laws.

Cryptocurrency Offerings (ICOs and ITOs)

The CSA notes that cryptocurrency offerings, in which coins or tokens are offered in exchange for ordinary currency (or other forms of cryptocurrency), are in many cases similar to initial public offerings (IPOs) of shares, stock or equity, in the CSA's view, and will in such cases be regulated as offerings of securities.

In determining whether or not securities laws apply, the CSA will look to substance rather than form: it gives the examples of a sale of coins that allow a customer to play a video game (probably not a security) versus a sale of coins the value of which is tied to the future profits or success of a business (likely a security, given that the existence of an expectation of profit is one of the defining characteristics of a security).

Offering memorandum requirements

Where an offering is of a security, it must be made by prospectus or pursuant to a private placement in reliance on a prospectus exemption. In the case of ICOs and ITOs involving retail investors who do not qualify as accredited investors, the exemption that could be used would be the Offering Memorandum (OM) exemption.1 The CSA notes that the "whitepapers" that are often published by fintech firms with respect to such offerings are often lacking the disclosure that is required in an OM. The Notice gives a long list of examples, including disclosure regarding:

  • A description of the business;
  • The ecosystem within with the coin or token operates;
  • The intended use of proceeds;
  • Features of the coin or token, including potential ROI, exit strategies and liquidity;
  • Valuation methodology for the coin or token;
  • The number of coins or tokens to be held by management vs. the number offered to the public;
  • Timelines for achieving milestones;
  • Remuneration payable to the management team and/or any advisers;
  • Management background information, including any legal or regulatory proceedings; and
  • All material risks of investing.

The Notice also indicates that the OM exemption is available only where the document contains all required information and where certain additional requirements are met, including signed individual risk acknowledgment forms, audited financial statements and ongoing investor disclosure, compliance with resale restrictions and the filing of reports of exempt distributions with the regulator (among others).

Dealer registration requirements

Moreover, businesses completing ICOs or ITOs may require dealer registration, or an exemption therefrom, if their trades in coins or tokens are seen to be trading in securities for a "business purpose". The Notice gives examples of how marketing coins or tokens at public events or via the Internet, or to a broad base of retail investors, can in the view of the CSA trigger the dealer registration requirement, which in turn will require compliance with "know your client" (KYC) rules, suitability requirements and cybersecurity risk management protocols, among other things.

Cryptocurrency Investment Funds

The Notice also considers investment funds that are being established to invest in cryptocurrencies, such as Bitcoin. While not wishing to discourage innovation in this area, the CSA notes that fintech businesses setting up such funds must be prepared for discussions with regulators with respect to a range of compliance issues, including:

  • Where fund investors are to include retail investors, the inapplicability in certain Canadian jurisdictions of the OM exemption. In other words, distributions involving retail investors in those jurisdictions may require a full prospectus.
  • Due diligence with respect to any cryptocurrency exchange that the fund will use to buy or sell coins or tokens, including with respect to its policies and procedures in relation to money-laundering, counter-terrorist financing, record-keeping and identity verification, and regarding liquidity and trading volumes.
  • Obtaining appropriate registrations as dealer, adviser and/or investment fund manager.
  • Valuation methodologies and audits thereof.
  • Choice of a qualified custodian.

As the Notice indicates, these are only examples of the types of question that those setting up cryptocurrency investment funds can expect to receive from Canadian securities regulators.


[1] See Section 2.9 of National Instrument 45-106 – Prospectus Exemptions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Miller Thomson LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions