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Are cryptocurrencies considered a security?

According to the Canadian Securities Administrators (CSA), the short answer is maybe. The longer answer is a bit more complicated.

A cryptocurrency is generally a form of digital currency that works in a manner different than currencies that operate through traditional banking systems. The most well-known of these is Bitcoin, although there are other types of cryptocurrencies that have been created in recent years.

In a recent article published by Canadian Business Magazine, the CSA examined how cryptocurrencies were administered and traded. Its results were that in some situations the digital currency operated much like other securities. The cryptocurrency offered certain privileges like that of other financial certificates, like voting rights and dividend rights within shares and stocks.

But digital currency also has features that traditional securities do no offer. The differences included how the cryptocurrencies were traded, how the currency was held, and how it was offered to users after a trade. The differences also became more complicated when international or cross-border trading was considered as well.

This makes reviewing contracts and agreements, and litigating any issues involving cryptocurrencies, a financially grey area. The summation is that not all processes related to cryptocurrencies fall under securities law. The processes that do, will be treated as such. However, the processes that do not fall under securities law may require a different legal approach.

The best way to understand what your legal options are if you are facing an issue is to consult with an experienced business lawyer. He or she will be able to assist you with analyzing whether securities laws apply and what your legal options are moving forward. If securities law does not apply, a corporate lawyer will be able to highlight what your legal recourses are, and the pros and cons of each scenario and how they impact your financial rights and interests.

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