Crypto Asset Statement - UniSwap
About this Statement
Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell UniSwap in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated October 12, 2022. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other CSA jurisdictions do not apply in respect of a misrepresentation in this statement to the extent that a crypto contract is distributed under the above-noted prospectus relief.
No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about any of the crypto assets (or crypto contracts) that are available through Coinsquare’s platform, including an opinion that the crypto assets are not themselves securities and/or derivatives.
Coinsquare has compiled the information contained in this Crypto Asset Statement to the best of its ability based on publicly available information.
About UniSwap
Since its inception in 2018, and inspired by Ethereum’s vision, Uniswap has long committed to the ideals of permissionless access, security, and immutability, creating a world where anyone can access financial services without fear of discrimination or counterparty risk. Its token UNI was created in September 2020 to make this vision a possibility. Owners of UNI can use it as a governance token and participate in decisions on how the platform is run. Since decentralized exchanges like Uniswap don’t have a middleman, traders can swap tokens directly with one another.
Risks
As with all assets, investing in UniSwap is not without some general risks. Many of these risks are identified and explained in our Risk Statement.
The relevant sections in the Risk Statement are as follows:
Platform Risk, Short History Risk, Price Volatility, Potential Decrease in Global Demand for Digital Assets, Potential for Illiquid Markets, Transfers of Digital Assets are Irreversible, Concentration Risks, Uncertainty in Regulation, Financial Institutions May Refuse to Support Transactions Involving Digital Assets, Digital Assets’ Blockchain May Temporarily or Permanently Fork and/or Split, Cyber-Security Risk, Airdrops, Issues with Cryptography Underlying Digital Asset Networks, Internet Risk, Open Loop System, Risk if Entity Gains a 51% Share of Digital Asset Network, Possible Increase in Transaction Fees, Possible Increase in Service Fees, Limited Canadian Investor Protection Fund Account, No Voting Rights, Custody of Digital Assets, Custody Risk Insurance, Threats to Coinsquare’s Physical Assets, Covid-19 Outbreak, Use of Leverage, Halting, Suspending, and Discontinuing Digital Assets.
In addition to the general risks, we outline some risks that are specific to UniSwap below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in UniSwap.
Impermanent Loss for Uniswap Liquidity Providers
A study of the Uniswap V3 protocol identified that almost half of all liquidity providers, people who stake their assets in Uniswap’s liquidity pools, are losing money due to impermanent loss.1 Impermanent loss occurs when an investor provides liquidity to a pool and the relative price of the deposited asset changes in comparison to their initial value during the deposit. The bigger this difference is, the more an investor is exposed to the loss.2 Increasing impermanent losses may have an impact on the number of contributors or the value of their contribution to Uniswap’s liquidity pools. If liquidity pools’ participation declines, Uniswap protocol’s usage may be impacted. Since UNI token is the governance token of the Uniswap protocol, decreased protocol usage may affect market sentiment toward UNI or affect UNI token price.
Concentration of UNI Among Top Holders
The UNI token supply is highly concentrated. The top 10 wallet addresses hold 52.59% of the supply, and the top 100 wallet addresses hold 85.41% of the supply. The total supply of UNI (1,000,000,000 tokens) is currently in circulation, with no scheduled additions. This means that the decisions of the largest holders could greatly affect the market price of UNI as they control the majority of marketable supply.3 Investors should consider the concentration of token holders, and consequently voting rights, when evaluating UNI.
UNI token reliance on multiple networks
Although UNI was initially offered only as an ERC20 token on Ethereum Mainnet, it was subsequently made available as a token as a BEP20 token on BNB Network, a token on Heco Network, a token on the Polygon network, a token on the Dai network, and a token on the Sora network.3 Consequently, the supply of UNI is distributed among these various networks, meaning that the integrity of UNI token is dependent on the stability and security of these different blockchain systems. Any fundamental issues in any of these networks could impact UNI’s market sentiment, market cap, and token price.
Coinsquare’s Due Diligence for Digital Assets
To be made available for trading on Coinsquare’s platform, a digital asset must pass the following due diligence reviews:
- Coinsquare Securities Law Assessment
- Coinsquare Digital Asset Security Audit
- New Digital Asset Business Case
Coinsquare undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Coinsquare’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.
References:
- Brian Newar. “Half of Uniswap v3 liquidity providers are losing money: New research.” Coin Telegraph. November 19, 2021. https://cointelegraph.com/news/half-of-uniswap-v3-liquidity-providers-are-losing-money-new-research
- Ayushi Abrol. “A Complete Guide on Impermanent Loss.” Blockchain Council. https://www.blockchain-council.org/defi/impermanent-loss/
- CoinMarketCap. “Uniswap (UNI).” https://coinmarketcap.com/currencies/uniswap/holders/
Published Date: Feb 5 2024
FINTRAC Registered
Property as prescribed in the Coverage Policy of the Canadian Investor Protection Fund (CIPF) that is held in customers’ accounts, including cash balances but not crypto assets, is protected by CIPF within specified limits. A brochure describing the nature and limits of coverage is available upon request or at https://www.cipf.ca.