The Ontario Securities Commission (OSC), on behalf of the Canadian Securities Administrators (CSA), recently granted ZED Network Inc. (Company) discretionary exemptive relief from prospectus and dealer registration requirements under Canadian securities laws for the distribution of the ZED digital remittance and foreign exchange blockchain token.
This prospectus exemption is the first granted under the CSA Regulatory Sandbox for a primary distribution of digital cryptocurrency tokens on a blockchain. To obtain the relief, the Company applied to the OSC LaunchPad as part of the CSA’s Regulatory Sandbox initiative. The relief provides regulatory certainty for the Company and users of the ZED Network for the use of ZED tokens in Canada, providing specific and clear prospectus and registration exemptions on prescribed conditions.
The CSA Sandbox has granted only two previous exemptions involving distributions of tokens, in 2017, and both relied upon the statutory offering memorandum prospectus exemption. The ZED tokens may be distributed in Canada and resold either under the normal accredited investor exemption or under this new customized exemption for money services businesses.
The relief permits ZED tokens to be distributed in Canada on a prospectus-exempt basis and be freely transferable to specified business users who may not qualify as accredited investors, by permitting ZED tokens to be distributed to money transfer operators (MTOs), either registered as money services businesses with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) or authorized to operate as money services businesses, or the equivalent, in accordance with the laws of foreign jurisdictions. The relief also provides that ZED tokens will be freely transferable subsequently among those MTOs as well as accredited investors, enabling their use as business-to-business payment remittance tokens. Eligible MTOs in Canada and abroad will be able to use ZED tokens to provide their remittance and foreign exchange services to business and retail customers.
ZED tokens will be issued and transferable on the Company’s proprietary ZED Network, a private access SaaS platform, which is integrated with the Stellar network, an open-source distributed payments blockchain infrastructure. The CSA relief also provides conditional dealer registration relief to the Company in connection with the distribution of the ZED tokens. The ZED Network will be accessible only by eligible users vetted and verified by the Company to trade in ZED tokens, including through identity verification and suitability assessment, in accordance with investment levels prescribed in the relief conditions. The ZED Network is not currently offered or available for use in the United States.
Blakes represented ZED Network Inc. in its CSA Regulatory Sandbox application.
For further information, please contact:
Niloofar Entezari 416-863-4342
or any other member of our Capital Markets group.
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