Very similar to the well-regulated Initial Public Offering (IPO), of a stock, the Initial Coin Offering (ICO) is an unregulated means of crowdfunding via use of cryptocurrency. During the ICO digital tokens or coins are given to early investors in exchange for money, which the tech companies use as a financial platform for future growth and development efforts.
Recently, Canadian securities regulators started taking a closer look at technology companies that offer digital currencies such as bitcoin to raise funds, to make sure they abide by the right set of rules as IPO registrants.
“We are open to innovation but we need to ensure that investor protection will be there.” - Louis Morisset, Canadian Securities Administrators - as reported by CBC News.
While most of the digital offerings have come in the form of established cryptocurrencies, the Canadian Securities Administrators (CSA) has explained that some coins or tokens offered should be regarded and regulated as securities.
The major issue here is related to the existence and treatment of similar “private currencies” like Air Miles or Canadian Tire money. They have been around for decades and were never considered stocks nor have they ever been deemed as a security.
As expected, the cryptocurrency world is not happy about the prospect of complying with securities regulations, strongly argues that in fact, ICO and ITO should be treated the same way other private currencies are.
The CSA paper offered assurances that it is not a crackdown on cryptocurrency world overall, but rather the agency just wants to make sure that any Canadian financial firms coming to market with ICOs in the future know and abide by the rules.
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