Crypto Asset Statement - XRP
About this Statement
Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell XRP in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated July 22, 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. Coinsquare is providing this Crypto Asset Statement on an “as is” basis and makes no representation or warranty as to accuracy or completeness of the contents.
Co-founded by Chris Larsen and Jed McCaleb, Ripple – the technology that XRP is a token of – was first released in 2012. As it’s most popular use case, XRP is a digital asset built for payments. It is the native digital asset on the XRP Ledger – an open-source, permissionless and decentralized blockchain technology that can settle transactions in 3-5 seconds. XRP can be sent directly without needing a central intermediary, making it a convenient instrument in bridging two different currencies quickly and efficiently.
As with all assets, investing in XRP is not without some general risks. Many of these risks are identified and explained in our Risk Statement. In addition to the general risks, we outline some risks that are specific to XRP 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 XRP.
XRP Charged by United States SEC
In December 2020, the United States Securities and Exchange Commission (SEC) filed an action against Ripple Labs Inc. and two of its executives, who are also significant XRP holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.1 In April 2022, Ripple’s CEO claimed that the court proceedings were going exceedingly well.2 However, it’s important for investors to stay apprised of the ongoing legal battle and understand the implications. If Ripple is found to be guilty, and consequently XRP is found to be a security under US law, this may have extreme consequences for XRP token price as Ripple and XRP will be subject to all SEC rules and regulations and may set a precedent for the SEC to take action against other crypto projects.3 We may de-list XRP based on a final decision by a US court that determines XRP is a security under US law.
XRP Network issues in 2021
In late 2021, the XRP network experienced issues when two nodes, maintained by Ripple Labs, were pushed out of sync with the rest of the network due to airdrop spam. The two affected nodes were revealed to be shouldering too much of the load of maintaining the XRP ledger. A few days after this initial issue, another bug had forced nodes verifying XRP’s full history to reboot, which caused about 20 minutes of downtime.4 It’s important for investors to be aware of historical issues when evaluating XRP.
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.
- U.S. Securities and Exchange Commission. “SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering.” December 22, 2020. https://www.sec.gov/news/press-release/2020-338
- Ryan Browne. “Crypto firm Ripple’s court battle with the SEC has gone ‘exceedingly well,’ CEO says.” CNBC. April 14, 2022. https://www.cnbc.com/2022/04/14/ripples-court-battle-with-sec-has-gone-exceedingly-well-ceo-says.html
- Bejamin Pimentel. “The Ripple-SEC legal brawl could be a game-changer for crypto.” Protocol. May 1, 2022. https://www.protocol.com/fintech/ripple-sec-xrp-lawsuit-trial
- Protos. “Ripple network overloaded by airdrop spam, crypto wallets knocked offline.” December 3, 2021. https://protos.com/ripple-xrpl-crypto-ledger-overloaded-airdrop-spam-source-code-broken/
Published Date: July 22, 2022