BCSC urges "extreme caution" when considering investment
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British Columbia’s securities regulator has joined its Ontario counterpart in warning investors about the risk of cryptocurrencies.
In a notice issued Thursday, the BCSC says it has noticed an increased in the number of companies offering initial coin offerings (ICOs) and initial token offerings (ITOs).
The commission says that in many cases these offerings are securities and therefore the companies and individuals involved in those ICOs and ITOs must comply with securities law.
In August 2017, the Ontario Securities Commission said that companies offering ICOs/ITOs should use a 4-prong test to determine whether an investment contract exists. This would be the case where (1) there is an investment of money (2) in a common enterprise (3) with the expectation of profit (4) coming significantly from the effort of others.
In its warning the BSCS says that all investors should exercise “extreme caution” when considering whether to invest in a cryptocurrency offering.
“While some companies follow through on their business plan or idea, others do not. Some companies issue coins or tokens solely for speculative trading in the secondary market, which is an inherently risky activity for investors,” the regulator says.
Been offered an unsolicited ICO/ITO offering?
The BCSC says that any investor who receives an unsolicited offer rto participate in an ICO or ITO should contact its inquiries line: 604-899-6854 or 1-800-373-6393.
