Financial Innovation in the Capital Markets

The ASC works with market participants who are engaged in using technology in new ways to understand how securities laws may apply to their ideas and proposed innovation.

CSA Regulatory Sandbox

ASC staff engage collaboratively through the Canadian Securities Administrators' (CSA) Regulatory Sandbox Committee – a cooperative initiative supporting financial technology (fintech) businesses looking to offer innovative products, services and applications in Canada.

For further information, please contact Denise Weeres, Director, New Economy or other members of the ASC Regulatory Sandbox team at regtechsandbox@asc.ca.

International Affiliations

In addition to participating on the CSA Regulatory Sandbox committee, ASC staff participate with various national and international regulators in formal and informal collaboration respecting fintech. Formal fintech networks include:

International Testing

Through its membership in the Global Financial Innovation Network the ASC is accepting applications by fintech entrepreneurs interested in international testing of their innovative product or service.  Businesses ready and interested in testing across international borders should review the GFIN’s Regulatory Compendium, which helps clarify the roles and responsibilities of the participating regulators.

Interested parties should submit the initial GFIN Cross-border Testing Application by December 31, 2020.

Do Alberta securities laws apply to crypto-assets?

Crypto-assets, commonly referred to as cryptocurrency, have captured significant attention. Crypto-assets are digitally represented assets that typically rely on cryptography and blockchain or distributed ledger technology. They are generally referred to as coins or tokens. Some of the more common crypto-assets include Bitcoin, Litecoin and Ethereum.

Alberta securities laws can apply to the trading of a crypto-asset in a variety of circumstances.

Crypto-assets are sometimes referred to by names such as “utility token", “payment token”, “virtual asset”, “digital currency” or “stablecoin”. The name given to the crypto-asset does not determine whether or not it is subject to Alberta securities laws. It is important to consider the definitions of “security” and “derivative” in Alberta securities laws, having regard to the characteristics of the crypto-asset itself, as well as the way it may be offered or traded. See the full definitions of those terms in the Securities Act (Alberta).

Generally, Alberta securities laws will apply to a crypto-asset if: 

  • The crypto-asset itself meets the definition of “security”. For example: 
    • It has the characteristics of a commonly known security, such as a share or a unit of an investment fund, or
    • It meets at least one of the many other prongs of the definition of security:  
      • A document constituting evidence of title to or interests in the capital, assets, property, profits, earnings, or royalties of a person or company.
      • A bond, debenture, note or other evidence of indebtedness.
      • A profit sharing agreement.
      • Evidence of an option, subscription or other interest in or to a security.
      • The crypto-asset is offered or sold in a manner that creates an “investment contract” (See the guidance in CSA Staff Notices 46-307 and 46-308, described below)
  • The crypto-asset is one of the assets in an investment pool offered to investors.
  • The crypto-asset itself meets the definition of “derivative”, for example, as an option, swap, forward contract or other financial instrument whose market price is derived from an underlying price, value or thing.
  • The crypto-asset is traded in a manner that creates a derivative or a security, for example, by a platform that holds custody of the crypto-asset such that the client only has a contractual right or claim to the underlying crypto asset. (See the guidance in CSA Staff Notice 21-327, described below.)

In addition, the fraud and market manipulation prohibitions of Alberta securities law may be engaged in respect of a crypto-asset that is the underlying to a derivative.

CSA Staff Notice 46-307 Cryptocurrency Offerings provides guidance as to how securities law applies to crypto-assets. CSA Staff Notice 46-308 Securities Law Implications for Offerings of Tokens provides additional guidance respecting when a crypto-asset offered in an initial token offering or initial coin offering will be considered an investment contract and therefore a security. Although they may be labelled ‘utility tokens’ the offering of tokens under an initial coin offering or an initial token offering has generally appeared to constitute a sale of securities.

If a crypo-asset is a security, it can be sold either with a prospectus or relying on one of the available prospectus exemptions or discretionary exemptive relief. Although securities sold under a prospectus are generally freely tradeable in a secondary market, resale restrictions apply to securities sold under prospectus exemptions. So unless discretionary exemptive relief is sought and obtained, crypto-assets sold under prospectus exemptions would not be available for secondary trading.

Alberta securities laws require that persons or companies that are “in the business” of trading securities or derivatives be registered as dealers. For example, online platforms that offer for sale crypto-assets that are securities or derivatives or facilitate the trading of securities or derivatives will generally be required to register as a dealer and, in some circumstances, will be subject to the requirements applicable to marketplaces.

Even if a particular crypto-asset is not itself a security or a derivative, it is possible that the way it is traded on a crypto-asset trading platform (or cryptocurrency exchange) might create a derivative or a security and require the platform to comply with securities law requirements applicable to dealers and marketplaces. This will typically be the case where a platform holds custody of the crypto-asset on behalf of a client and does not immediately deliver it to the client such that the client only has a contractual right or claim to the underlying crypto asset.See CSA Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets for further details.

What should I consider before buying a crypto-asset?
What should I consider if I’m planning to start a business dealing or advising in crypto-assets?
What should I consider if I’m planning to start a crypto-asset trading platform?
What should I consider if I’m planning an initial exchange offering (IEO), initial coin offering (ICO) or initial token offering (ITO)?