On February 14, the British Columbia Securities Commission published Notice 2018/01 Consulting on the Securities Law Framework for Fintech Regulation (the Notice). Although the Notice invites comment on British Columbia’s capital market structure and its Fintech industry, the issues have wider relevance to Canadian capital markets as a whole.

The BCSC is seeking input on a wide range of issues including the following:

  • Models for initial coin offerings (ICOs) and potential factors to consider in deciding whether an ICO is a distribution of securities subject to securities regulation;
  • Factors to consider in deciding whether or not a virtual currency is an investment contract subject to securities regulation.
  • Whether the regulatory framework for start-up crowdfunding should be relaxed (e.g., by increasing the limits on the amount of capital that can be raised under the exemption);
  • The impact of initial coin offerings (ICOs) on crowdfunding;
  • The risks that online advisers face in relying on third parties to conduct certain Know-Your-Client (KYC) responsibilities and how these risks might be managed; and
  • Regulatory concerns for firms that manage cryptocurrency funds (such as the potential for arbitrage due to less government oversight, price volatility around trading cryptocurrencies, custodial challenges when dealing with cryptocurrencies, and security and anti-money laundering risks).

The BCSC also is soliciting feedback on broader issues regarding future state of the Fintech industry and the regulation related to it, and in particular how to facilitate innovation and identify new technologies and their impact in the securities markets.

We look forward to seeing stakeholder input on all these pertinent issues raised and will continue to monitor developments in Canadian capital markets.