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Crypto Asset Statement Ether
Last updated: May 25, 2023
No securities regulatory authority or regulator in Canada has assessed or endorsed Ether or any of the other Crypto Contracts or Crypto Assets made available through Shakepay Inc. (“Shakepay”) on the Shakepay Platform, including an opinion that Ether itself is not a security and/or derivative. Changes to applicable law may adversely affect the use, transfer, exchange, or value of any of your crypto assets, and such changes may be sudden and without notice.
Shakepay is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Shakepay Inc. dated May 25, 2023. The statutory rights of action for damages and the right of rescission in sections 217 and 221 of the Securities Act (Québec) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Shakepay Risk Statement.
What is Ether and Ethereum?
Ether is the native digital asset (sometimes referred to as “virtual currency” or “cryptocurrency”) of the Ethereum platform. Ethereum was conceived in 2013 by Vitalik Buterin and further developed by a group of innovators. The Ethereum platform is a decentralized, open-source blockchain-based network designed to run decentralized applications. Ethereum was launched in 2015.
Ether is used on the Ethereum platform to pay for transaction fees that are needed to interact with the platform and as a unit of value. There are many uses of ether and of the Ethereum blockchain. For example: transaction (“gas”) fees denominated in ether need to be paid in order to perform transactions such as sending ether or sending “tokens” (second-level units created as part of “smart contracts”) to another wallet or contract. Non-Fungible Token (“NFTs”) can also be minted on Ethereum which can be used to represent indivisible items such as photos, videos and other digital files as unique items. There are many other use cases of Ethereum that can be found online, and due to its open nature, anyone may build new use cases without requiring permission of a central authority.
In Q4 2022, Ethereum’s consensus mechanism was changed from the existing proof-of-work (PoW) execution layer of Ethereum to its new proof-of-stake (PoS) consensus layer. This upgrade from PoW to PoS is often called “The Merge.” The Merge is an upgrade to the Ethereum network that aims to improve the network’s security, governance, energy efficiency and scalability.
Canada’s securities regulators require that we disclose to you certain information and make certain statements regarding digital assets.
We are required to inform you that digital assets (referred to more broadly as “Crypto Assets” by Canada’s securities regulators) are risky and come with unique characteristics. The value of ether (and the assets built on top of the Ethereum platform) relies primarily on its underlying blockchain technology, but also on its utility as a store of value, means of exchange, and the demand of newly designed use cases. The Ethereum blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ethereum blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ethereum blockchain. We encourage all clients to do their own research before purchasing or selling any digital asset including ether.
No Canadian securities regulatory authority has expressed an official opinion on ether including whether it is considered a security and/or a derivative.
Shakepay has conducted an assessment of ether and like Canadian securities regulators, we do not express an opinion about whether it is a security and/or a derivative. Should ether ever be legally deemed a security and/or a derivative, or due to other regulatory changes in Canada, Shakepay may be obligated to stop offering the Crypto Asset on our platform for some or all of our clients.
Shakepay’s due diligence considered the developer ecosystem, technical risks, legal/enforcement actions, timeline, market capitalization and liquidity of ether and Ethereum. Our due diligence did not find any concerns based on the factors considered and we note that ether is widely traded in regulated Canadian and international venues.
This Crypto Asset Statement does not include all risks associated with buying and selling ether. Like an investment in other crypto assets, an investment in Ether includes the following general risks: (i) volatility risk and liquidity risk, (ii) short history risk, (iii) demand risk, (iv) forking risk, (v) code defects, (vi) regulatory risk, (vii) electronic trading risk, and (viii) cyber security risk. You are encouraged to also review the Risk Statement for additional discussion of the general risks associated with what Canadian securities regulators term “Crypto Assets”. You must always conduct your own assessment and should not rely on this Crypto Asset Statement or the Risk Statement, which highlight only certain risks relating to ether.
Shakepay is offering what securities regulators in Canada term “Crypto Contracts”, including ether, under the “Prospectus Relief” exemption as contained in the exemptive relief decision dated May 25, 2023. Canadian securities regulators require us to inform you that “the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada do not apply to any misrepresentation in this Crypto Asset Statement”. Shakepay is unable to offer legal advice with respect to Canadian securities laws and does not express an opinion as to any remedies that may or may not be available to you.