Canadian regulators approve the first legal ICO project. What’s going on?

ICOs have been outlawed in China, but on the other side of the world, regulators in Canada have taken the exact opposite approach.

Fine? Refund? No, no, the purpose of the Quebec Financial Markets Authority (AMF) is to better understand the application of blockchain. In fact, the AMF not only determined that the token sales (ICO) projects initiated by the platform belong to securities, but also accepted such ICO companies to enter the regulatory sandbox.

It is reported that the Impak Coin project has become the first project under the AMF sandbox supervision, and it is also the first compliant Canadian ICO project.

It is noteworthy that the AMF was also willing to make concessions on regulatory rules after several securities issuers made requests for the purpose of protecting investors.

According to Patrick Theoret, director of the AMF’s corporate finance department, this move is the best strategy to approach new technologies.

Patrick Theoret told CoinDesk:

“We are willing to ease some of the requirements, for example, on a test case basis. The test is to see if the exemptions we grant will lead to problems in investor protection.”

Going forward, the AMF will become the lead regulator for the ICO space in Canada, with the rest of Canada’s provinces and territories fulfilling this decision through the Canadian Securities Passport system, which allows startups to access all of the country’s markets.

Keep up with the pace

Announced earlier this year by the Canadian Securities Administrators, a coalition of provincial securities regulators, the sandbox is for fintech projects that don’t easily fit into traditional regulatory frameworks. ICOs, a new fundraising mechanism, fit that definition.

Paul Allard, President of Impak, commented:

“I had been working with Canadian regulators for several years prior to the Impak Coin project and knew they would be keen to adjust their regulatory framework to catch up with the competitive cryptocurrency space.”

Grant of exemption

Firstly, Impak will not have to register as a securities dealer, according to Sophie Jean, director of the AMF's intermediary supervision agency.

In addition, since ICO tokens are classified as securities, a statement of intent is required for the distribution of such tokens. However, Jean mentioned that the AMF has also waived this requirement.

So far, Impak’s token has been approved for a two-year test application window, after which stakeholders will reconvene and decide how to make the Impak project work better.

The regulator stressed that if investors had no complaints about the project, it was willing to extend the exemption window, even permanently, saying:

“If there are no complaints about the lack of securities regulatory environment, then we would consider granting a permanent regulatory exemption. Or, if we have multiple proposals of a similar nature, then perhaps we could consider a permanent regulatory amendment so that our rules and regulations allow for this.”

Learning by doing

AMF officials further stressed that going through the approval process through the regulatory sandbox was crucial as it allowed them to better understand the business model, with Jean explaining that while Impak was a “traditional ICO” project with only a white paper and new tokens, regulators had not approved such a precedent in the past.

“This is very, very new, and so we have had to adapt the regulations to provide tailored terms and conditions for the distribution of digital currencies,” she said.

It is reported that on August 24, AMF officials adopted the guidance of the Canadian Securities Administrators (CSA) when connecting with the Impak project, classifying its tokens as securities.

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