Ontario’s chartered professional accountants are being urged to avoid participating in unregulated cryptocurrency offerings.
In a white paper to be published on Thursday, CPA Ontario implores the province’s accountants to “act with objectivity and professional skepticism” when dealing with cryptocurrencies and to avoid working with any initial coin offerings that don’t treat their underlying tokens as securities.
Initial coin offerings, or ICOs, allow companies to finance new ventures by selling digital tokens or coins. The new fundraising method, similar to crowdfunding, has taken the world by storm, with more than 1,500 cryptocurrencies currently in existence. New coin offerings have already raised US$6.3-billion in the first four months of the year, according to data from CoinMarketCap cited in the CPA Ontario report.
ICOs have left regulators around the world on high alert, as they grapple with how to classify the tokens and whether or not they should be subject to securities laws.
South of the border, U.S. Securities and Exchange Commission chairman Jay Clayton has said every ICO he has seen is a security.
Meanwhile, the Canadian Securities Administrators, an umbrella organization of provincial securities regulators, said it will determine on a case-by-case basis whether a particular token constitutes a security or not. Those that do have the characteristics of a security will be expected to comply with securities rules or receive exemptions from regulators.
CPA Ontario, a regulatory body and professional organization for the province’s accountants, says its members should encourage ICO issuers to work with regulators and ensure that their tokens comply with securities laws.
Carol Wilding, president and chief executive officer of CPA Ontario, says the organization studied the market and spoke to industry players before concluding that its members should stay away from coin offerings that look like securities but call themselves “utility tokens” instead.
“That’s the Wild, Wild West environment that we need to manage, because this is where you’ve got a lot of high risk and potential fraud and manipulation,” Ms. Wilding said.
She also called on regulators – from securities watchdogs to the bodies that set accounting standards – to work quickly and co-operatively to create “smart” regulations governing ICOs.
The lack of clarity surrounding how to classify virtual currencies such as bitcoin has left some scratching their heads as to whose role it should be to regulate the emerging asset class. While the CSA has been looking at the issue through a securities lens, others have suggested that the digital coins should be designated as currencies.
However, the Bank of Canada has said cryptocurrencies don’t have the characteristics of money and are therefore currently being treated as commodities when it comes to taxation.
“We’ve got to get everybody at the table, as opposed to finger-point as to who is the one group that should be the one that does it all,” Ms. Wilding said.
“I just don’t think that’s the way it’s going to work. Everybody’s got to participate.”