Ontario’s securities market watchdog has issued a warning to businesses using blockchain: you may run afoul of our laws.

In statements, the Ontario Securities Commission (OSC) said on 8th March that the province’s laws may apply in some cases, advising companies that use or are looking to utilize the tech to get in touch with the regulator if they have any doubts.

The OSC made specific references to initial coin offerings, or ICOs, through which companies or individuals can issue and sell blockchain-based tokens in order to fund or bootstrap a new project. The model’s supporters say that it represents a wholly new mechanism for entrepreneurs to access capital, while critics argue that it fuels excessive speculation and fraudulent behavior.

According to the OSC, an ICO could fall under its jurisdiction even if the tokens themselves don’t signify an ownership stake in a particular business.

The agency said:

“Products or other assets that are tracked and traded as part of a distributed ledger may be securities, even if they do not represent shares of a company or ownership of an entity. Businesses’ specific use of [distributed ledger technology] may trigger Ontario securities law requirements, including the need to be registered or file a prospectus.”

The OSC said that it plans to engage in more dialogue with industry stakeholders in order to prevent businesses from unknowingly violating its statutes.

“Because this is a novel area, businesses may not be aware that some uses of this technology could trigger securities law requirements. We encourage these businesses to speak with us about securities law and investor protection requirements that may apply,” said Pat Chaukos, chief of OSC LaunchPad, the agency’s fintech-focused outfit.

The warning closely follows an OSC-hosted hackathon at which a number of blockchain-focused startups developed concepts based around the concept of regulatory technology. Notably, one of the top-placing startups developed a solution for categorizing information related to ICOS through which regulators can obtain data.

Image via Shutterstock

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.