Canada’s securities regulators need to clarify their positions on crypto-currencies and adopt a more friendly approach to open up the investment potential for a new wave of innovative startups, a serial entrepreneur argues in an open letter.

Canadians are being robbed of opportunities to invest in homegrown innovative startups that are using an initial coin offering (ICO) to raise capital, writes William Mougayar, a venture capitalist and author of The Business Blockchain. His open letter and petition on Change.org is addressed to the Canadian Securities Administrators (CSA) and the Ontario Securities Commission (OSC).

“It’s not a friendly environment in Ontario right now for companies that want to get involved in the blockchain space,” he says in a phone interview. “I’ve seen a lot of startups struggle and not really feel safe doing this, particularly in Ontario.”

The total value of all cryptocurrencies, such as Bitcoin and Ethereum, reached $27.8 billion this year according to investment bank Canaccord Genuity. It projects that could rise to a value of more than $1.2 trillion by 2025. It also notes that venture capital investments in bitcoin startups hit $1.6 billion this year.

Mougayar worries Canadian entrepreneurs will be left out of that party.

“The genesis of this unprecedented wave of capital availability is global. For the first time, the level playing field is open to Canadian entrepreneurs to compete for a share of this capital, without being limited by the scarcity of Canadian or U.S. venture capital,” he writes. “But the reality is that Canadian companies have not been able to easily participate in this new wave of wealth creation, in large part due to the regulatory obscurity around compliance requirements.”

Mougayar points to Toronto-based messaging app Kik, which excluded Canadians from the sale of its new Kin token in September. Mougayar’s own global blockchain index will also exclude Canadian residents.

To change that, securities regulators must be clear on how to build a cryptocurrency that is exempt from securities regulations.

William Mougayar, chair of Token Awareness, says regulators need to carve out a new category for blockchain tokens.

“The guidance to date has been heavier on consumer protection risk warnings,” he writes. “The OSC has not yet issued clear explanation on what is acceptable, leaving market participants to guess, or be confused.”

Mougayar wants the CSA and OSC to allow Canadian consumers to invest in cryptocurrency instruments from around the globe; for Canadian funds to be created and managed from Canada without

In an August 24 staff notice, the CSA outlined how securities law may apply to initial coin offerings, token offerings, and other cryptocurrency investment funds. In it, CSA chair Louis Morisset points to the potential for new capital raising opportunities and welcomes the innovation.

Guidelines issued to businesses looking to raise money with an ICO should contact their local securities regulator to see if they’re in compliance with the law, according to the CSA. FinTech companies are encouraged to work with the CSA Regulatory Sandbox program, which can provide exemptions from securities laws and requirements in a faster and more flexible manner than a standard application. These exemptions would allow companies to test their products throughout Canada on a time-limited basis. It’s up to the provincial regulators to implement these sandbox programs, as OSC has done with Launchpad.

But Mougayar isn’t satisfied with the program’s results.

“They say they have a sandbox program but in reality it’s not very progressive, and they’re not attracting innovative startups,” he says. “They are viewing everything as securities.”

On the afternoon of Oct. 2, the petition has more t, an 150 supporters. Mougayar is also the chair of non-profit group Token Awareness, which is looking to establish best practices around digital token systems.



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