On June 28, 2018, the Investor Office of the Ontario Securities Commission (OSC) published a report entitled "Taking Caution: Financial Consumers and the Cryptoasset Sector". The report summarizes the results of a survey, conducted in March 2018, of more than 2,500 Ontarians aged 18 and older.
Cryptoasset Ownership
The report describes that 5% of Ontarians currently own cryptoassets (or, as the survey referenced, cyrptocurrencies). This translates into approximately 500,000 Ontarians. Furthermore, an additional 4% of Ontarians in the age bracket owned cryptoassets in the past but no longer do.
Of particular note was the report's determination that men aged 18-34 are more likely to own a cryptoasset in comparison to any other demographic. However, of those surveyed, only half have invested approximately $1,000 and only 9% invested more than $10,000, primarily in Bitcoin and Ether.
Familiarity with Cryptoassets
The survey explored the nature of Ontarians relationship with cryptoassets. It asked participants to provide true or false answers to the following six statements relating to Bitcoin:
- Bitcoin allows for direct transactions between two parties, without a third party involved;
- the total supply of Bitcoin is fixed;
- all Bitcoin transactions are recorded on a distributed ledger that is publicly accessible;
- Bitcoin transactions take place instantaneously;
- Bitcoin is secure from cyberattacks; and
- Bitcoin is backed by the government.
Only 24% of those surveyed correctly answered four or more of these questions and only 3% received a perfect score. Surprisingly, 16% of the survey participants incorrectly agreed with the statement that "Bitcoin is backed by the government." We note that the Bank of Canada also conducted a similar study related to Bitcoin and determined that many of those surveyed incorrectly concluded that "Bitcoin is similar to other national currencies ... that are backed by the government."1
Additionally, the survey also requested that participants identify which government agency they would contact to seek assistance if they encountered a problem involving a cryptoasset they hold or used to hold. Although these complaints should be directed to the OSC, provided they occurred as a result of an Initial Coin Offering (described below), the survey results indicate the public is not aware that the OSC holds this responsibility. Accordingly, consumer complaints may be inadvertently distributed amongst a number of different government agencies. This ultimately creates an ineffective use of government resources.
User-Experience
The report also examined the user-experience for cryptoasset holders. Of those surveyed, 21% have experienced a halt in trading; 20% have found it difficult to withdraw money from their account; 16% noted delays when they transferred money into their trading account; and 15% were confused by hidden transaction fees. Regardless, it would appear that individuals continue to adopt the use of cryptoassets despite continued concerns relating to the user-experience.
Initial Coin-Offerings
In addition to examining the user-experience for cryptoasset holders, the OSC also investigated the depth of knowledge Ontarians have about an Initial Coin Offering (ICO), which is a means of raising capital. The OSC found that approximately 16% of past and present cryptoasset owners, representing approximately 1.5% of Ontarians or 170,000 Ontarians have participated in an ICO. However, half of the past and present cryptoasset owners are under a mistaken belief that ICOs are either not regulated or they do not know the organization responsible for regulating these initial offerings.
Furthermore, the report identified that more than 1 in 10 Ontarians have been approached about, or sought information about an ICO. It would appear that the OSC, as the regulator of cryptoassets and ICOs, is continuing to increase its focus on publicizing and establishing a well-defined regulatory regime. Therefore, Ontarians need to be aware that the OSC will continue to take regulatory and enforcement measures against entities which provide cryptoassets that are non-compliant with securities laws.
Footnotes
1 Bitcoin Awareness and Usage in Canada. Staff Working Paper, 2017-56.
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