The emergence of cryptocurrencies and blockchain technology over the past several years has shaken up the financial services sector in unprecedented fashion, in a corner of the Canadian economy that has been notoriously slow to adopt and adapt to innovative change. This phenomenon has the potential to significantly re-shape many aspects of the modern economy. We have reported on this blog in the past (see here and here) on the evolution of blockchain and cryptocurrency and what it could mean for M&A activity in Canada. It looks like that impact could ramp up in the coming months.

At the end of August, the Canadian Securities Administrators (CSA) signaled that regulation could be on the way for virtual currencies and other technology that approximates “securities” for the purposes of provincial securities laws.

In a Staff Notice released by the CSA regarding cryptocurrency offerings, the group of provincial regulators announced the following:

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.

While questions will remain surrounding the lack of clarity on the form and substance of oversight, as it relates to cryptocurrencies, what appears certain is that increased scrutiny for cryptocurrencies through regulation is around the corner.

The author would like to thank Peter Valente, Articling Student, for his assistance in preparing this legal update.

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