Kik bans Canadians from investing in new crypto-token
Citing “weak guidance” from regulators, Waterloo, Ont.-based 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 crypto-token, 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 investors 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, called Kin, to users of the app in exchange for doing things that improve the service.
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.
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. ICOs allow startups to raise large sums of money from the public without the strict disclosure requirements of listing on a stock exchange.
This gives entrepreneurs access to a new source of capital and allows ordinary people to invest in fledgling firms. But it exposes unsophisticated investors to huge risks they might not understand.
On Monday, China banned digital currency financing outright. 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, sympathizes with the tough 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.