Crypto Asset Statement - Cardano

About this Statement

Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Cardano 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. 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.

About Cardano

Cardano is a proof-of-stake blockchain built on the Ouroboros proof-of-stake consensus protocol, and developed using the Haskell programming language: a functional programming language that enables Cardano to pursue evidence-based development, for security and stability. Founded in 2015 by Ethereum co-founder Charles Hoskinson, Cardano is known for its high transactions-per-second and for its energy efficiency. ADA is the native token of Cardano.

Risks

As with all assets, investing in Cardano 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 Cardano 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 Cardano.

Concentrated Distribution of Genesis Holdings

Cardano’s genesis block distributed over 5 billion ADA to three entities: IOHK, EMURGO, and Cardano Foundation. These 5 billion tokens amounted to approximately 16.7% of the initial supply. These three entities were identified as part of the Technical and Business Development Pool in the Cardano ecosystem.¹

Planned Hard Fork (Vasil Fork 2022) in Cardano Network

The Cardano development team has announced that the Vasil Hard Fork will occur in June 2022.² Cardano’s founder, Charles Hoskinson, has described it as a major hard fork combinator event that will contain pipelining, which will be a massive performance improvement for Cardano. The Vasil Hard Fork will bring multiple scaling solutions to the network, such as new Plutus CIPs, Hydra, and UTXO on-disk storage.³ The team has said that these improvements will boost Cardano’s throughput and optimize the system to support an increasing range of decentralized finance (DeFi) apps, smart contracts, and DEXs. It is important that investors consider this hard fork when evaluating Cardano, as forks in other networks have sometimes affected asset price and potentially caused rifts in development teams and network nodes despite the improvements that they may bring.

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:

Cardano. “Genesis, Distribution.” January 2017. https://cardano.org/genesis/
Felix Mollen. “Cardano explains about upcoming Vasil hard fork.” Binance. April 14, 2022. https://www.binance.com/en/news/top/7090623
Charles Hoskinson. “Rollup.” Youtube. April 12, 2022. https://www.youtube.com/watch?v=LZ3SdmiTcSs

Published Date: July 22, 2022

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.