Too few startups have independent board members — and that’s a big problem.
Proposed legislation doesn’t keep up with a changing securities landscape, the think tank argues
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
Is your startup board in need of a shake-up?
Sifted | Aline Eibl | Sep 2020
Too few startups have independent board members — and that’s a big problem.
When I entered the startup world as an investor, I saw boards composed of founders, management and all-male investors. The topics on the table were only about money: figures, KPIs and growth. Where I expected a guiding light for diversity, ESG, values, purpose — you name it — there was money-talk. Even the corporate world left that behind years ago.
Investors are mostly capable and experienced people, but rarely do they meet the main criteria for a board member: relevant, diverse and independent. The best board members are strategically engaged but operationally and financially distant without a conflict of interests.
Independence: Zero
From Silicon Valley to Europe, independent board members remain an exception. An Australian survey showed that only a quarter of startups have independent directors. By definition, board members should have the company’s best interests at heart. But all too often, investors are thinking about their return on investment.
See: Startup Genome: Canada Ranks 14th in The Global Startup Ecosystem Report 2021
Independent advice is critical — to deepen perspectives and find new ones, for conflict resolution and building bridges, mentoring and, most importantly, bringing in a set of diverse viewpoints. Boards that bring in the right balance of expertise fill in gaps of knowledge and experience, offer access to global networks and can help founders build higher-performing startups.
Diversity: Get rid of your blind spots
Bringing diverse and independent opinions around a table has proven to be an effective remedy against biased and overly speedy decision making in the boardroom. Diversity is not only about gender, but goes far beyond, addressing age, ethnicity, background, experience, industry, sexual orientation and focus topics. On the majority of startup boards, diversity fails at the first point (despite this having an impact on financial performance).
See: Culture and Diversity Leadership: Tale of Two Doors
The “secret sauce” of a successful board process is reaching out for different opinions and exploring blind spots. Having a variety of voices around the table that reflect the company’s strategic goals, and a diverse range of customers and stakeholders is the only way to go. Startups with professional boards have shown to be more resilient — and can be more attractive to VCs and private equity investors. Internally, professional boards add value by giving a vision and a purpose-value compass which helps attract and enthuse talent.
Continue to the full article -->here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
|---|---|---|
 |  |  |
C.D. Howe says Ontario should pause the new Capital Markets Act to first modernize the existing Securities Act for current times
Investment Executive | Mark Burgess | Dec 21, 2021
Proposed legislation doesn’t keep up with a changing securities landscape, the think tank argues
The Ontario government should pause its planned Capital Markets Act reform, the C.D. Howe Institute says, calling draft legislation a “rewarmed version of a decade-old proposal” that doesn’t fit current needs.
The Progressive Conservative government released its proposed new Capital Markets Act (CMA) for public comment in October. The CMA would spin out the Ontario Securities Commission’s (OSC) adjudicative function into a separate tribunal, separate its chair and CEO roles, and strengthen the regulator’s enforcement power.
The draft legislation is out for comment until Jan. 21
See: Federal and provincial governments shutting down Cooperative Capital Markets Regulatory project
Rather than introducing new legislation, author Harvey Naglie wrote in a C.D. Howe Institute memo, the government should amend the existing Securities Act and then take a more strategic approach to further changes.
Naglie, a financial services veteran who served as a senior policy advisor in the finance ministry under the previous government, said the CMA is repurposed from legislation that was developed in 2014 as provinces were looking to integrate securities acts under the national regulatory initiative.
That initiative effectively ended earlier this year.
Adopting the CMA now would “jeopardize a once in a generation opportunity to implement a bona fide forward-looking securities act,” Naglie wrote. The act’s focus on regulating sales practices and protecting investors through disclosure is outdated, he added.
For example, he said,
“This model is not fundamentally designed to effectively regulate a capital markets environment where fintech and regtech are redefining the boundaries among financial services and products; where the regulatory flashpoint is advice delivery rather than a securities transaction; where salespeople and portfolio management are being supplanted by robo-advisors and artificial intelligence; where advisor compensation and motivation is more fee-based than commission based; where ESG and diversity are redefining the calculation of financial risk and return; and where investors need more and better financial awareness and regulatory safeguards.”
See: New Ontario securities law to reset regulatory balance
The government is already making a number of changes to the OSC, including new mandates to focus on reducing the regulatory burden and to foster competition and capital formation.
Naglie said the government should wait to see how those changes play out before pursuing a more significant overhaul.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
New Mastercard Study: Majority of Canadian Consumers Embrace Open Banking
Mastercard | Dec 15, 2021
Report finds more than 77 per cent of consumers in Canada – and 86 per cent of Gen Z – are already connecting their bank accounts to technology apps
TORONTO, Dec. 15, 2021 /CNW/ - Mastercard released a new report, The Rise of Open Banking, demonstrating the mainstream adoption of technology to power smarter, more meaningful digital experiences. Open banking puts consumers at the centre of where and how their data is used to more effectively provide the services they want and need. Fintech companies and banks use this consumer-permissioned data to provide easier and more inclusive access to credit, personal financial management, digital wallets and payments services.
See: Tink Survey Report 2021: Open banking spending, investments and use cases
Open banking is already embedded in several areas of our daily lives, including personal financial management tools, linking of financial accounts and account opening. According to the report, over nine in 10 consumers (95 per cent) in Canada use online and mobile financial applications to manage money, with paying bills (85 per cent) and banking (84 per cent) as the most popular use cases.
Willingness to Connect Financial Accounts
Critical to driving many, if not all, of these transactions is the ability for consumers to securely link their bank or payment accounts and authorize their financial data to be used in online financial applications. The report found that:
- 65 per cent of consumers in Canada have, or would, consider connecting their bank accounts to financial apps and services to automate financial tasks
- 69 per cent of consumers in Canadian have, or would, consider connecting their bank accounts to financial apps and services to easily send money to someone
See: Privacy Implications of an Open Banking System in Canada
Trust in Fintech
Consumers are already connecting their data via multiple platforms to manage finances, and thus make their data work harder for them. Of those surveyed:
- 55 per cent of consumers in Canada feel very confident using technology to manage money
- Convenience is a top driver for using financial technology, with 62 per cent of consumers in Canada saying fintech saves them time and is less work
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Rise of Regulatory Compliant DeFi Protocols
European Blockchain Convention | Dec 17, 2021
European Blockchain Convection hosted an exciting conversation featuring crypto market leaders who agreed that decentralized finance (DeFi) would ultimately become the future of finance. The discussion sought to understand how institutional investors can access DeFi.
With institutional investors, regulation has to be there for this particular group to feel comfortable with the crypto market. This was quite clear from a previous panel, where the consensus was there is no way asset managers are putting clients’ money into crypto without feeling the space is safe enough from a regulatory point of view.
According to Chris Sullivan, Co-founder of Hyperion Decimus, the first layer of regulation should protect investors from fraud which unfortunately doesn’t happen with the existing rules. A recent report by Elliptic, a London-based firm, indicates that investors have lost over $10 billion on DeFi products.
“The first layer of regulation should protect investors from fraud” – Chris Sullivan, Co-founder of Hyperion Decimus
According to Sullivan, the crypto community should create a set of principles for how the area should grow, including clear procedures for how businesses and products can be developed.
The problem of relying on regulators is that they always have to play catch up to a space that is developing at a breathtaking pace. However, according to Sullivan, institutional fund managers, in areas where regulators move fast to address fraudulent behavior, can have strong audit protocols that help them smell out fraudulent projects early, which benefits their clients.
Rise Of Regulatory Compliant DeFi Protocols
Concordium is an example of a regulatory compliant DeFi project that identifies users at the protocol level, thereby boosting trust between the involved parties and allowing for accountability with relevant regulators. However, the ID stamps are encrypted, allowing for private transactions. Lone Fonss Schroder, the company CEO, says that the project is in a position to build substantial and institutionalized products through its CCD token that will facilitate stable prices with low fees.
See: As regulators circle above, how should the DeFi industry respond?
The need to create trust and do things right is a significant driver for upcoming regulatory compliant DeFi protocols. And even though the space is full of experimental projects, Schroder believes it is irresponsible to allow half-baked projects to thrive where investor money is involved, just like a test car can not be allowed to the market without proper assurance it meets all the safety requirements.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Gensler’s Updated Regulatory Agenda Critized by SEC Commissioners Peirce and Roisman (Exempt Securities)
Crowdfund Insider | | Dec 13, 2021
SEC Commissioners Hester Peirce and Elad Roisman have once again voiced their concern regarding SEC Chairman Gary Gensler’s regulator agenda – a list that was recently updated.
Last summer, Gensler published his regulatory agenda and now an update is available. When Gensler posted his initial goals, Commissioners Peirce and Roisman issued a statement criticizing the list of rules and regulations the Gensler Commission was seeking to address. Today, the two Commissioners are once again expressing their disappointment in Gensler’s agenda.
The two Commissioners have posted a statement labeled “Falling Further Back” calling Gensler’s agenda “ambitious in scope” but failing “to include any items intended to facilitate capital formation.”
“Instead, the agenda is brimming with plans to redo recently completed rules, add new regulatory obligations, and constrain investor choice,” chastised the two Commissioners.
At the very top of Gensler’s list (once again) are exempt securities offerings as well as a change to the definition of an accredited investor – a move that would most certainly aspire to limit access further to private securities.
See:
More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps
Hester Peirce on personal liberty, crypto regs and retail investor particiation
Hester Peirce: Lawless in Austin
To quote the statement but the Commissioners:
“One example is the proposal to alter the thresholds at which an issuer is required to register a class of securities with the Commission. In 2012, Congress enacted the bipartisan Jumpstart Our Business Startups (a.k.a., the JOBS Act), which, among other provisions aimed at improving capital access for newer companies, specifically raised these thresholds in order to allow companies greater flexibility in deciding whether and when to go public. This provision has been especially important for pre-IPO companies that use equity as part of their employee compensation arrangements and for startups in industries with high initial capital requirements. Lowering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation. A likely unintended consequence of lowering thresholds will be to limit the opportunity of employees, smaller investors, and other non-institutional investors to invest in promising businesses.”
Continue to the full article --> here
View the statement by the commissioners --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Podcast: Meet the Crypto Kings – Founders of the Leading Exchanges
The Economist | Dec 15, 2021
The Economist podcast on markets, the economy and business. This week we speak to Brian Armstrong, Changpeng Zhao and Sam Bankman-Fried, the founders of leading crypto exchanges Coinbase, Binance and FTX
See: Creating Sustainable Wealth Through Digital Finance
FOUR MEN hold the keys to a $2trn market. Our finance correspondent Matthieu Favas speaks to some of the most powerful people in the world of cryptocurrencies—the founders of the most important crypto exchanges—to find out what it takes to stay on top in the most volatile market of all. We examine their strategies against a looming reckoning with regulators and ask whether their visions for how crypto will change the world could become reality. Rachana Shanbhogue hosts.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
A Brief History of Security Tokens And Why This Time It’s for Real
Republic | Janine Yorio | Dec 14, 2021
A multi trillion dollar universe of illiquid, privately held assets stands ready to be securitized on the blockchain. Millions in venture capital is riding on the premise. So why haven’t security tokens caught on yet?
The difference between Utility & Security Tokens
Utility tokens are like chips in a casino. They can be used as currency within the casino for playing games, tipping dealers and sometimes buying drinks or hotel rooms. Holders of a casino’s chips do not own a stake in the casino, nor does it entitle the holder to any of the house’s winnings or profits. Security tokens, on the other hand, are like owning stock in the casino, shares in the company itself. When the house wins, you win. Security token holders own something that might pay off through profits or distributions. Utility tokens are used in an ecosystem. Security tokens give you ownership in that ecosystem.
In 2018, when many notable utility tokens nosedived in value, the crypto community rallied around security tokens and declared that their simplicity would be the salvation of the crypto economy. Some were even saying that security tokens would become crypto’s “killer app.” Venture capital poured into security token projects, lured by the prospect of bringing liquidity to private markets, especially real estate, which is the world’s largest asset class--and one where brilliant minds have struggled to bring true liquidity for decades.
See: More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps
That year, Founders Fund and Andreesen Horowitz led an unusually large ($28MM!) seed round into Harbor, a crypto startup promising to put ownership of real-world assets on the blockchain. The company’s founder declared that Harbor would do to the real estate market what email did to snail mail. Three years later, the real estate market has escaped any noticeable change. Harbor’s slow attempt to mainstream security tokens is indicative of what has happened across the entire security token industry: big promises, disappointing results. It’s easy to see why people might (wrongfully) conclude that security tokens are a bust.
Why have security tokens been so slow to catch on?
In order for security tokens to achieve their full potential, they must fulfill their promise of liquidity. Liquidity requires two things: a regulated exchange and sufficient trading volume. So far, neither of these requirements has materialized.
Most attempted security token exchanges have floundered. In 2018, well-funded companies like Templum, tZero, Coinbase, Openfinance and Sharespost announced that they would list security tokens on their exchanges. Sharespost was particularly well positioned to do so because they were an existing broker dealer with ATS registration. Three years later, the only exchange which has succeeded even modestly is tZero. However, even tZero, a passion project of publicly-traded firm Overstock.com, only offers two security tokens for public trading, one of which is an affiliate of its parent company. Openfinance, although still in existence, offers securities with a combined market cap of only around $50 million–a mere drop in the bucket.
See: WEF Insight Report: Digital Assets, Distributed Ledger Technology, and the Future of Capital Markets
At the moment, no dominant platform for trading security tokens exists. Furthermore, the complex compliance issues have largely discouraged new entrants. But there is hope. Since security tokens are programmable, compliance can be baked right into the token which should reduce compliance hassles. Compliant protocols like Polymath and Harbor have figured out how to collaborate with exchanges to address these issues.
Trading volume has also been thin, but the expectation that digital securities would trade with the volume and frequency of public equities or cryptocurrencies was flawed from the start. Digital securities represent private investments, an asset class that has always traded infrequently. Adding blockchain does not necessarily incentivize owners to trade them any more frequently.
Exchanges don’t exist and trading volume is thin. Where is the silver lining in all of this?
Security tokens are subject to greater regulatory scrutiny than utility tokens (like Bitcoin or Ethereum) from the US Securities & Exchange Commission (the “SEC”). Security tokens require full SEC approval to be sold in public offerings to non-accredited investors or traded on secondary exchanges. This is one of the many reasons their growth and adoption has been more modest.
The SEC (once considered an insurmountable obstacle to compliant token offerings) is finally starting to qualify offerings. Nothing pours fuel on a financial product’s fire quite like transparency and regulatory clarity, and it’s happening now.
See: IMF asks Financial Stability Board to develop a global framework for standards for regulation of crypto assets
In July 2019, the SEC qualified the first Regulation A token offering (a $23MM offering for Blockstack) setting precedent for the sale of tokens that are immediately tradable to both accredited and non-accredited investors. They also provided clarity around secondary sales.
In July 2020, Arca Labs began trading its digital security token, the ArCoin, which is registered with the SEC and represents shares in Arca’s U.S. Treasury Fund.
In September 2020, the SEC finally registered an $85 million security token offering from INX, a foreign crypto trading company. This became the first ever security token IPO qualified by the SEC, marking a major milestone.
In April 2021, the SEC qualified a Reg A+ token offering for Exodus, marking the first digital asset security which conferred equity in a US-based issuing company. Exodus subsequently raised $75 million from 6,800 individual investors.
Security tokens aren’t strictly a US phenomenon. In May 2021, a Singapore-based bank issued its first security token offering, a $11.3MM digital bond that pays a 0.6% annual coupon.
These movements may appear relatively small, but they mark an important transition for the crypto industry, as it evolves from the Wild West of the dark web to navigating the daunting obstacle course of regulatory scrutiny. All of these changes pave the way for massive mainstream adoption.
See: Your Complete Guide to Security Token Exchanges
Given all of these positive developments, I have become very bullish on security tokens, but let me be very clear: my enthusiasm has absolutely nothing to do with fractionalization or liquidity. Both of those things are already widely available in the stock market. Tokenization adds very little on either of these fronts.
Instead, let’s be brutally honest about what people love about crypto. (Hint: it’s not their stability or their SEC compliance.) Crypto’s popularity is entirely attributable to its insane volatility--so volatile that 20%+ intraday swings are not atypical. Previous attempts to tokenize stable, income-generating assets have failed to acknowledge this fundamental truth. If the carrot of fractionalization alone were seductive enough to encourage people to invest, then REITs would be as popular as Shiba Inu coin. But they’re not.
The problem with early security tokens like Aspen Coin or the RealT coins is that they seem like they make sense but they offer absolutely zero potential for the kinds of meteoric returns that Dogecoin fans love. Security token advocates point to the stability of underlying assets as an important attribute and one that should breed a strong affinity. But stability contradicts the very ethos of crypto. If security tokens are ever going to induce full-fledged crypto mania, it will be because their issuers finally embrace their volatility rather than try to avoid it.
The perfect security token is one that is secured by real assets--but where the underlying assets themselves offer the potential payout for a moonshot return.
I believe that security token alchemy will occur when an insightful issuer finally creates a SEC-qualified digital security token that has potential moonshot returns. Why?
See: The era of security tokens has begun
Combining the legitimacy of SEC qualification with the rocket fuel of crypto-style returns would be like the gateway drug for all the crypto-curious conservative investors who have dabbled in Bitcoin but are too timid to invest in the types of highly speculative utility tokens which might turn out to be completely worthless. A truly compliant crypto asset backed by actual, quantifiable and verifiable assets with the potential for exceedingly high returns would break the internet--and maybe Coinbase, too.
For investors attracted to the high returns but deterred by an investment backed by nothing more than a white paper and a promise of future utility, the allure of such a security token would be irresistible.
Authored by: Janine Yorio, Managing Director, Republic.co
Republic Realm is a metaverse innovation and investment platform and among the largest owners of digital real estate NFTs in Decentraland, Sandbox and Axie Infinity and among the most active developers of in-metaverse content in Sandbox and Decentraland. Republic Realm is the creator of the Fantasy Islands master-planned community NFT project. Republic Realm is backed by strategic financial and crypto investors and Galaxy Interactive. Republic Realm is based in New York City, and is an affiliate of Republic.co, the alternative investment platform. For more information, visit www.republicrealm.com.
This article is featured in NCFA's digital magazine, Fintech Confidential (Issue 4 Oct 2021). Click to read the latest thought leadership, insights and trends about Fintech in Canada:
Checkout NCFA's digital magazine, Fintech Confidential (Issue 4) --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
