Reuters | Alastair Sharp | August 25, 2017

TORONTO (Reuters) - Canadian securities regulators on Thursday said many Canadian crypto currency offerings they have studied involve the sale of securities and should abide by tough existing rules unless otherwise granted exemptions.

Crypto currencies such as Bitcoin and a growing stream of alternatives allow anonymous peer-to-peer transactions without the need for banks or central banks. They are also used by companies seeking to raise capital, in the form of initial coin offerings (ICOs) or initial token offerings (ITOs).

The currencies exist in a legal gray area, however, with regulators scrambling to come up with rules that will not stifle innovative funding models while also protecting investors.

The Canadian Securities Administers, an umbrella group of provincial watch-dogs, said any coin or token whose value is tied to the future profits or success of a business will likely be considered a security, while those providing access to a specific good, such as the ability to play a video game, may not.

See:

• So You Want to (Legally) Raise an ICO?
• CSA Staff Notice 46-307: Cryptocurrency Offerings

“With the offerings that we have reviewed to date, we have in many instances found that the coins/tokens in question constitute securities for the purposes of securities laws, including because they are investment contracts,”

Executives and advisers to the country’s growing fintech industry criticized the statement for not offering enough clarity.

“There still is a lot of gray area in terms of the guidance on when a crypto currency or token would be a security,” said Daniel Fuke, a partner in the securities and M&A group at Fasken Martineau who is advising companies, including CoinSquare, a crypto currency marketplace.

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