The Canadian Securities Administrator (CSA) has published new guidance on the applicability of securities laws to new issues of coins or tokens, including ones that are commonly referred to as “utility tokens,” the CSA announced on Monday.
The new guidance, published in a staff notice, is designed to supplement the CSA’s initial guidance in this area, which was issued back in August last year.
Since then, the CSA has found that many of these sorts of offerings are considered to involve securities, even though they issue tokens to finance the development of software, online platforms, or other applications.
“In many of these cases, the offering will involve securities despite the fact that the tokens have one or more utility functions,” the notice states.
Monday’s guidance aims to address when an offering of tokens involves an offering of securities, and the regulator’s approach to offerings that are structured in multiple steps.
The CSA “will have concerns where a multiple step transaction is used in an attempt to avoid securities legislation,” the notice stresses.
CSA enforcement staff are, “conducting active surveillance of coin and token offerings activity to identify past, ongoing and potential future violations of securities laws or conduct in the capital markets that is contrary to the public interest.”
“Since publishing initial guidance, we have engaged with numerous businesses considering token offerings and have found that most of these offerings involve securities,” says Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers, in a statement. “Our notice sets out additional guidance based on situations we have seen to date and common inquiries we have received from businesses and their advisors.”