About this Statement

Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Hedera in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated October 12, 2022. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other CSA jurisdictions do not apply in respect of a misrepresentation in this statement to the extent that a crypto contract is distributed under the above-noted prospectus relief.

No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about any of the crypto assets (or crypto contracts) that are available through Coinsquare’s platform, including an opinion that the crypto assets are not themselves securities and/or derivatives.

Coinsquare has compiled the information contained in this Crypto Asset Statement to the best of its ability based on publicly available information.

About Hedera

Hedera is a blockchain platform, which is open-source, that has its own cryptocurrency, called HBAR. The Hedera Network can be used to create tokens natively, and it also supports arbitrary Smart Contracts written in Solidity (similar to the larger Ethereum network). Hedera leverages a proprietary “hashgraph” consensus model which it claims allows higher total throughput of transactions on the network. The network is secured via a proof of stake protocol.

HBAR tokens were initially sold via Simple Agreement for Future Tokens (SAFT) open to insiders, advisors, friends and family in December 2017. Another SAFT round took place in Q1 2018. A third SAFT sale occurred in August 2018, and was only open to accredited investors.(1) The genesis block of the chain was not produced until September 13th, 2019.

Risks

As with all assets, investing in Hedera is not without some general risks. Many of these risks are identified and explained in our Risk Statement.

The relevant sections in the Risk Statement are as follows:  

Platform Risk, Short History Risk, Price Volatility, Potential Decrease in Global Demand for Digital Assets, Potential for Illiquid Markets, Transfers of Digital Assets are Irreversible, Concentration Risks, Uncertainty in Regulation, Financial Institutions May Refuse to Support Transactions Involving Digital Assets,  Digital Assets’ Blockchain May Temporarily or Permanently Fork and/or Split, Cyber-Security Risk, Airdrops, Issues with Cryptography Underlying Digital Asset Networks, Internet Risk, Open Loop System, Risk if Entity Gains a 51% Share of Digital Asset Network, Possible Increase in Transaction Fees, Possible Increase in Service Fees, Limited Canadian Investor Protection Fund Account, No Voting Rights, Custody of Digital Assets, Custody Risk Insurance, Threats to Coinsquare’s Physical Assets, Covid-19 Outbreak, Use of Leverage, Halting, Suspending, and Discontinuing Digital Assets.

In addition to the general risks, we outline some risks that are specific to Hedera below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in Hedera.

Governance By Private Council

Hedera has a group of 39 large companies and funds which govern the token and network development called the Hedera council. Token holders do not get to vote for governance changes. At the time of writing, only 31 of those council seats were filled. A complete and current list of council members can be found here: https://hedera.com/council.  

Petition by HBAR holders regarding declining price  

In February 2024 a petition was launched by HBAR holders to the governance group of Hedera Hasgraph, expressing dissatisfaction and concern about the declining price of HBAR.(2) The petition mentioned trust in the governance group comprising of large, multi-national corporations like Google, IBM, Boeing, and others, which has proved to not have a positive effect on the price of HBAR. The petition outlines 13 action items that might help restore the price of HBAR. Investors should be aware of this petition when evaluating HBAR.  

Coinsquare’s Due Diligence for Digital Assets

To be made available for trading on Coinsquare’s platform, a digital asset must pass the following due diligence reviews:

  1. Coinsquare Securities Law Assessment
  2. Coinsquare Digital Asset Security Audit
  3. New Digital Asset Business Case

Coinsquare undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Coinsquare’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.

References:

  1. “[SAFT] How did Hedera raise funds?” Hedera. 2021. https://help.hedera.com/hc/en-us/articles/360007219337–SAFT-How-did-Hedera-raise-funds  
  2. Suyu Moma. “Petition to Hedera Hashgraph LLC. & affiliated organisations to restore the price of HBAR” Change.org. February 12, 2024. https://www.change.org/p/petition-to-hedera-hashgraph-llc-affiliated-organisations-to-restore-the-price-of-hbar

Last updated on Jun 17, 2024