ICOs Can Pose ‘Fundamental Issues’ Says Ontario Securities Regulator

Ontario’s securities regulator will prioritize work on cryptocurrencies and initial coin offerings in the coming year.

In a draft “Statement of Priorities” published on March 29, the Ontario Securities Commission (OSC) flagged token sales and cryptocurrency markets as two areas in which it would push to better understand – and regulate – during the next 12 months. The OSC said it will accept feedback on its document until the end of May.

The commission cited the development of cryptocurrencies in particular as an innovative tool in the financial sector, but also noted that it carried certain market risks, stating in the document:

“This innovation is driving more complexity in financial markets and products and creating a risk that consumers may not understand what they are buying. Initial offerings of digital currency and similar instruments can raise fundamental issues about the scope of securities regulation, at the same time that they present significant investor protection issues.”

Despite this warning, the OSC took it as a “measure of success” that gaps in cryptocurrency regulation “are identified and addressed in a timely manner with minimal impacts on investors or disruptions to capital markets.”

The commission added that the province is “viewed as a fintech innovation hub” due to its support for new forms of investment – possibly referring to the TokenFunder ICO, which it approved last October.

In the document, the OSC committed to providing enhanced guidance on what it considers a security, as well as to working with cryptocurrency exchanges to discuss developments in the industry. The regulator further promises to conduct “ongoing monitoring and reviews” of cryptocurrency issuers.

Canada’s situation is unusual, in that the country lacks an overarching national securities regulator, despite a decades-long push to establish one from some quarters.

Securities regulation is determined at the provincial level, making densely-populated Ontario’s regulator one of the most powerful. Quebec’s securities regulator has also emerged as a force in Canada’s cryptocurrency market – last year, it became the first in the country to give the go-ahead to an ICO.

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