Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell EOS 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.
EOS was launched by Dan Larimer, who is also the founder and creator of Bitshares and Steem, and CTO of Block.one. Block.one is currently the main development team behind EOS. EOS was created for developers to easily access and adopt blockchain technology and to reduce some of the pain points including speed, scalability, and flexibility in program design. The EOS blockchain is able to support and scale larger digital infrastructures with ease and finds its use in the creation and management of programmable architecture. EOS is also the name of the network’s cryptocurrency token.
As with all assets, investing in EOS 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 EOS 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 EOS.
EOS rewards “miners” in their delegated-proof-of-stake consensus system with newly-created EOS tokens. This means that the supply of EOS is not fixed or capped, and that holders should expect that the token supply increases continuously. Currently, the inflation rate is capped at 1% per year. The entirety of the 1% of new supply is distributed to block producers and standby producers in the EOSIO network.1
The EOS inflation rate is voted upon by network block producers, meaning that the rate at which new tokens are added to the supply can be altered.1 Investors should consider the consistently increasing supply, and its ability to be altered when evaluating EOS.
Since its launch, EOS has been criticized as being too centralized by many crypto followers. The majority of block producers are located in China, which creates a source of risk from state intervention.2 To mitigate against risk of centralization, Block.one could modify voting mechanisms in the EOSIO network, however they have not done this. Additionally, members of the EOS community believe that Block.one have not acted in the best interest of EOS and their control of the network has actually been detrimental to EOSIO and the EOS token price. The EOS Network Foundation has established itself as an organization to revitalize the network and hold Block.one accountable for its decline.3 Investors should consider these events, and the potential for additional actions in the future, when evaluating EOS.
To be made available for trading on Coinsquare’s platform, a digital asset must pass the following due diligence reviews:
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.
