Crypto Asset Statement - USD Coin
About this Statement
Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell USD Coin 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 USD Coin
USDC is backed by fully reserved assets, redeemable on a 1:1 basis for US Dollars, and governed by Centre, a membership-based consortium, formed by Coinbase and Circle, that sets technical, policy and financial standards for stablecoins. As an open standard and public smart contract, USDC has rapidly grown the largest stablecoin industry ecosystem in the world.
Risks
As with all assets, investing in USD Coin 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 USD Coin 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 USD Coin.
Reliability of USDC peg to US Dollar
The intention of USDC is for each token to be valued at $1 USD at all times. This value is maintained by using a 100% collateralization approach, where every USDC in circulation has $1 USD held in reserve.1 Circle claims that the reserve fund is held in cash and US treasuries, where cash is held at major financial institutions like BlackRock and Bank of New York Mellon, and US treasuries are held at third party custodians. While Dai, an overcollateralized, algorithmic stablecoin has long maintained transparency into its collateral reserves at all times through daistats.com, Circle released its first monthly collateral reserve report in July 2022.2, 3 The monthly report explains where USDC’s US dollar reserves are held. Since the US dollar reserves are the basis of USDC’s peg to the $1 USD value, it is important for investors to monitor these collateral reports. Any variation in the supply of USDC token to the value of US dollar reserves may have an adverse effect on USDC’s peg to the US dollar.
USDC token reliance on multiple networks
Although USDC 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 Solana Network, a token on the Algorand network, a token on the Dai network, and a token on the Fantom network.4 Consequently, the supply of USDC is distributed among these various networks, meaning that the integrity of USDC token is dependent on the stability and security of these different blockchain systems. Any fundamental issues in any of these networks could impact USDC’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:
- Circle. “What is USDC?” Circle APIs. May 2022. https://developers.circle.com/docs/what-is-usdc
- Maker. “A Guide to Dai Stats.” December 15, 2020. https://blog.makerdao.com/a-guide-to-dai-stats/
- Kumar Natasha. “Circle releases first monthly USDC collateral report.” The Times Hub. July 17, 2022. https://thetimeshub.in/circle-releases-first-monthly-usdc-collateral-report/14218/
- CoinMarketCap. “USD Coin (USDC).” https://coinmarketcap.com/currencies/usd-coin/
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.