Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Decentraland 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.
Decentraland is a virtual reality platform that is entirely owned and operated by its users. MANA is the ERC-20 type token that is used as the native currency of the system to buy LAND (which is a non-fungible token that represents a piece of the virtual map). Users can also buy and sell estates, avatar wearables and names in the Decentraland Marketplace. The Decentraland Foundation, the organization behind the development of the Decentraland software, was founded by Esteban Ordano and Ariel Meilich in 2015. Today, land owners and users of the Decentraland platform use it for advertising, collecting digital art and socializing on their online forums.
As with all assets, investing in Decentraland 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 Decentraland 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 Decentraland.
Although MANA was initially offered only as an ERC20 token on Ethereum Mainnet, it was subsequently made available as a token on Solana Network, the DAI Network, and the Fusion Network.1 Consequently, the supply of MANA is distributed among these various networks, meaning that the integrity of MANA token is dependent on the stability and security of these different blockchain systems. Any fundamental issues in any of these networks could impact MANA’s market sentiment, market cap, and token price.
Decentraland’s token price saw significant gains in the second half of 2021 as hype for metaverse grew, backed by Facebook’s rebranding as Meta. However, as that excitement has subsided, Decentraland’s count of daily active users (DAU) has declined to fewer than 1000 DAU. This level of daily active users is significantly below mainstream video games, such as Counter-Strike, Dota 2, and Fortnite, which have DAUs in the hundreds of thousands.2 Investors should consider Decentraland’s daily active users and general sentiment towards metaverse gaming, as dwindling interest could negatively impact Decentraland’s market capitalization and MANA’s token price.
A study of the ownership concentration of different metaverse platforms found that 49.8% of all of Decentraland’s LAND NFTs are owned by only 0.5% of the full owner population.3 This could be indicative of a lack of decentralization or indicative of a few large entities attempting to monopolize LAND holdings. Investors should consider this distribution of LAND ownership and make their own conclusions about how this may affect user adoption, market sentiment, market capitalization and token price.
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.
