On August 7, 2020 the Canadian Securities Administrators (CSA) granted relief to Wealthsimple Digital Assets Inc. (Wealthsimple) from certain registrant obligations, prospectus requirement and trade reporting requirements and suitability requirements to allow Wealthsimple to distribute Crypto Contracts Rights (as defined below) and operate a platform that facilitates the buying, selling and holding of crypto assets subject to certain conditions, including investment limits, account appropriateness and reporting requirements. The relief is time limited to allow Wealthsimple to operate in a test environment and will expire upon the earlier of twenty four (24) months or the date the filer transitions the platform to its IIROC affiliate.
CSA Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets (CSA SN 21-327), securities and/or derivatives legislation may apply to platforms that facilitate the buying and selling of crypto assets, including crypto assets that are commodities, because the user’s contractual right to the crypto asset may itself constitute a security and/or a derivative (Crypto Rights Contract).
To foster innovation and respond to novel circumstances, the CSA has considered an interim, time limited registration framework that would allow crypto asset platforms to operate within a regulated environment, with regulatory requirements tailored to the crypto asset platform’s operations. The overall goal of the regulatory framework is to ensure there is a balance between the need to be flexible and facilitate innovation in the Canadian capital markets, while upholding the regulatory mandate of promoting investor protection and fair and efficient capital markets.
The Wealthsimple platform permits clients resident in Canada to enter into Crypto Rights Contracts to purchase, hold and sell Bitcoin and Ether (together, the Crypto Assets) through the Wealthsimple. Wealthsimple wishes to ultimately carry on this activity through its affiliated entity, which is registered as an investment dealer and a member of the Investment Industry Regulatory Organization of Canada (IIROC). While the Wealthsimple is engaged in discussions with IIROC on a regulatory approach for its affiliated entity to carry on this activity, the order allows Wealthsimple to commence operations and conduct beta testing.
The order can be found at: https://www.osc.gov.on.ca/documents/en/ord_20200807_wealthsimple-digital-assets.pdf
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
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