Kik bans Canadians from investing in new crypto-token
Ontario firm seeks to ‘avoid risks’
Citing “weak guidance” from regulators, Waterloobased messaging app Kik Interactive Inc. has banned Canadians from participating in a public sale of its new crypto-token.
In a blog post published Thursday evening, Kik chief executive Ted Livingston said the company has reached out to the Ontario Securities Commission, but did not receive a clear answer as to whether or not securities law will apply to the token sale. To stay on the right side of the law, Kik decided to exclude Canadians from participating in the initial public sale of its cryptotoken, called Kin, on Tuesday.
“Our Kin project needs to move forward, so to avoid risks arising from this uncertainty, we, a Canadian company, have decided to move forward without Canada,” Livingston said in the post. “If innovation is to play an important role in Canada’s economy, we can’t afford to let this innovation go elsewhere.”
Kik has already raised US$ 50 million in a private sale to accredited investor and seeks to raise an additional US$ 75 million from members of the public starting Tuesday. After the public sale, Kik plans to distribute additional crypto- tokens to users of the app in exchange for doing things that improve the service, such as hosting popular group chats or developing bots.
In an email, OSC spokesperson Nima Ranawana said the regulator has, in fact, told Kik it considers Kin to be a security. She said the OSC is open to providing Kik with relief from certain securities regulation requirements if it meets conditions such as providing protection to retail investors.
“We continue to be open to such a discussion, and want to work with Kik to ensure that all investors, including Canadian investors, can participate in the offering with appropriate protections,” Ranawana said.
Securities regulators around the world are grappling with how to handle token sales, also known as initial coin offerings or ICOs, such as the one Kik is planning. Similar to a Kickstarter campaign, ICOs allow startups to raise large sums of money from the public without the strict disclosure requirements associated with listing on a stock exchange.
On the one hand, this gives entrepreneurs access to a new source of capital and allows ordinary people to invest in fledgling companies that could one day reap huge returns. On the other hand, it exposes unsophisticated investors to huge risks they might not properly understand.
On Monday, China banned digital currency financing outright, calling ICOs “illegal public financing.” Canada and the U. S. have taken a softer approach, saying they consider many ICOs to be sales of securities but not all of them.
Joseph Weinberg, chief executive of the Bitcoin remittance company Paycase and a member of the OSC’s fintech advisory committee, said he personally does not believe Kik’s token sale should be considered a security, but sympathizes with the difficult position the regulator is in. “The OSC is trying their best to ensure open innovation continues to occur without over-regulating and inhibiting our ability as innovators to do our jobs,” he said in an email.
Kyle Kemper, executive director of the Blockchain Association of Canada, said he believes individual investors should be allowed to make their own decisions about whether or not to invest in ICOs.
“Yes, there are risks, but it’s up to individuals to decide on these risks and evaluate the risks in order to participate in them,” he said. “We’re really hoping to be able to work with the OSC to make it a little bit more clear what is considered a security and what’s not considered a security.”
In addition to Canadians, Kik is barring residents of the states of New York and Washington from participating in the token sale for regulatory reasons. Residents of Sudan, Iran and Cuba are also unable to participate because of sanctions from the U. S. Treasury and other organizations.
CAN’T AFFORD TO LET THIS INNOVATION GO ELSEWHERE.