The Canadian Securities Exchange (CSE) is taking first steps to bring crypto fundraisers, or initial coin offerings (ICOs), within the regulatory framework. While ICOs have come under regulatory scrutiny this year, the CSE believes that digital crowdsales can be done right, with built-in safeguards to avoid fraud.
Specifically, the Canadian Securities Exchange is introducing a securities clearing and settlement platform which is being built on the Ethereum blockchain.The platform creates an innovative funding model for businesses through which they will be able to issue conventional equity and debt using the so-called security token offerings (STOs). The tokenized securities will also give retail investors the comfort of knowing that they are purchasing instruments that can stand up to the scrutiny of regulation
Kabuni Technologies Inc., a Vancouver-based startup that tracks 3D printing products on its blockchain-based platform, is the first company to file a prospectus with British Columbia’s regulator to win approval of issuing tokens to investors through a STO.
In addition, the tokens could then be traded on the Canadian Securities Eexchange’s equity trading platform, which marks the first time a tokenized security has been listed for trading on a regulated exchange.
Although Kabuni will have to go through a lengthy process to launch its token, we expect there will be many more soon in existence. The CSE platform is necessary in order to lower the barriers to entry for launching securities, similar to how Ethereum made it easy to launch utility coins.
Indeed, the emergence of securities tokens could be the next mega-trend in the crypto space as STO tokens are backed by real assets like equity, shares or commodities.
Like many jurisdictions around the world, Canada is looking for ways to regulate ICOs and harness the unique features of blockchain technology without stifling innovation or driving startups to other jurisdictions.
Unlike ICOs, the STOs will be subject to full regulation by applicable securities commissions. The new platform also answers one of the most pressing questions facing the crypto and financial services communities, which is how regulatory authorities will treat various digital assets.