Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Wrapped 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.
Wrapped Bitcoin is an ERC-20 token designed to mimic and represent the value of Bitcoin on the Ethereum network. WBTC is maintained by a group called the WBTC DAO, originally developed by BitGo, Ren, and Kyber networks. The Bitcoin that is used to back WBTC is verified via a “proof of reserve” system that confirms the 1:1 backing between minted WBTC tokens and Bitcoin stored by custodians. WBTC brings greater liquidity to the Ethereum ecosystem including decentralized exchanges (DEXs) and financial applications. WBTC also standardizes Bitcoin to the ERC20 format, creating smart contracts for Bitcoin. This makes it easier to write smart contracts that integrate Bitcoin transfers.
As with all assets, investing in Wrapped 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 Wrapped 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 Wrapped Bitcoin.
Wrapped Bitcoin maintains its peg to the Bitcoin price through a protocol that is controlled by the WBTC DAO. The protocol relies on DAO participants who perform various roles within the system, such as custodians and merchants. Merchants send bitcoin to custodians and initiate the minting process. Merchants then receive a WBTC token and deliver it to the customer.1 Investors should be aware of the WBTC DAO and the minting and reserve process when evaluating Wrapped Bitcoin.
Since WBTC is pegged to the Bitcoin price, Wrapped Bitcoin is affected by any change in the price of Bitcoin. Consequently, all risks to Bitcoin are also risks to Wrapped Bitcoin. We strongly suggest reading the Bitcoin crypto asset statement when evaluating Wrapped Bitcoin.
Although WBTC was initially offered only as an ERC20 token on Ethereum Mainnet, it was subsequently made available as a token on the Fantom network, a token on Avalanche C-Chain, a token on the Polygon network, a token on the Tomo network, and a token on the Arbitrum L2 network.2 Consequently, the supply of WBTC is distributed among these various networks, meaning that the integrity of WBTC token is dependent on the stability and security of these different blockchain systems. Any fundamental issues in any of these networks could impact WBTC’s market sentiment, market cap, 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.
