Crypto Asset Statement - Chainlink
About this Statement
Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Chainlink 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.
Founded in 2017 by Sergey Nazarov, Chainlink is a blockchain abstraction layer that enables universally connected smart contracts. Through a decentralized oracle network, Chainlink facilitates the transfer of tamper-proof data from off-chain sources to on-chain smart contracts to become the dominant form of digital agreement. Its digital token LINK acts as data payloads to make this transfer possible by converting complex agreements into blockchain readable formats. Tokens can be stored in any ERC20 wallet, as the ERC677 token retains all the functionality of an ERC20 token.
As with all assets, investing in Chainlink 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 Chainlink 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 Chainlink.
Concentration of LINK Supply
Chainlink’s parent organization, SmartContract.com, owns and controls over 60% of the entire LINK token supply. Approximately half of that supply is reserved for node operators and ecosystem rewards to incentivize network participants. These tokens are typically not traded on the free market, but as they are controlled by a single entity, that entity’s actions could greatly impact LINK’s market cap in a liquidation event.1
Chainlink Network reliance on Ethereum
As Chainlink is built on top of the Ethereum network, it is highly dependent on the continued stability of that network. Any fundamental issues in the Ethereum network may impact LINK token value. Investors should consider this dependency when evaluating Chainlink.2
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.
- Messari. “Chainlink: Launch & Initial Token Distribution.” https://messari.io/asset/chainlink/profile/launch-and-initial-token-distribution
- Lorenz Breidenbach et al. “Chainlink 2.0: Next Steps in the Evolution of Decentralized Oracle Networks.” April 15, 2021. https://research.chain.link/whitepaper-v2.pdf?_ga=2.70453840.1381091407.1656945276-1399669354.1656945276
Published Date: Feb 5 2024