Crypto Asset Statement - Bitcoin
About this Statement
Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Bitcoin 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.
Satoshi Nakamoto invented Bitcoin in 2009. He based the concept on another invention - the blockchain, which is a distributed digital record. As the world’s first and most popular cryptocurrency, Bitcoin is practically the face of the industry. It's also the most valued cryptocurrency. Bitcoin is governed by the collective authority of its users. Peer-to-peer transactions are made using a decentralised infrastructure, and value is stored without the involvement of any government, enterprise, or financial institution. Besides being controlled by a network of decentralised computers and providing an alternative to centrally controlled fiat money, Bitcoin also allows you to efficiently transfer funds over the internet.
As with all assets, investing in Bitcoin 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 Bitcoin 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 Bitcoin.
Concentration of Bitcoin Holdings
A study by the National Bureau of Economic Research found that approximately 1% of bitcoin owners hold over 27% of the entire supply of bitcoin. Similarly, approximately 10,000 individuals control over 5 million bitcoin of the maximum 21 million btc supply.1
Bitcoin halving and eventual transaction fees
The bitcoin protocol is structured such that every 210,000 blocks, the block reward is reduced by half. Theoretically, the halving means that the mining reward provides less incentive and miners will eventually rely on transaction verification fees. Current projections predict that the last bitcoin will be mined in 2,140, after which time the incentive for mining bitcoin will consist solely of fees.2 The increase of transaction fees and the subsequent effect is a risk that investors should be aware of.
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.
- Igor Makarov, Antoinette Schoar. “BLOCKCHAIN ANALYSIS OF THE BITCOIN MARKET.” October 2021. https://www.nber.org/system/files/working_papers/w29396/w29396.pdf
- Simon Chandler. “How Will Bitcoin Halving Affect Its Security?” Cryptonews.com. March 15, 2020. https://cryptonews.com/exclusives/how-will-bitcoin-halving-affect-its-security-6031.htm
Published Date: Feb 5 2024