Securities law requirements may apply to businesses using distributed ledger technologies (DLT), such as blockchain, as part of their financial products or services offerings, advised the Ontario Securities Commission (OSC) in an announcement March 8.

 “Many uses of distributed ledger technologies have the potential to increase transparency and efficiencies in our capital markets, and we are keen to support this type of innovation,” says Pat Chaukos, Chief of OSC LaunchPad – an OSC initiative aimed at supporting fintech businesses in navigating regulatory requirements. 

Investor protection rules

Chaukos says that because DLT is a novel area, businesses may be unaware that some uses of this technology could trigger securities law requirements. “We encourage these businesses to speak with us about securities law and investor protection requirements that may apply.”

Businesses are using DLTs in trading, clearing, and settling securities. “DLT are core to a growing number of new virtual and digital assets,” says the OSC.

May need to file prospectus

Products, or other assets, tracked or exchanged as part of a distributed ledger, could be securities “even if they do not represent shares of a company or ownership or an entity,” underlines the regulator.

“Businesses’ specific use of DLT may trigger Ontario securities law requirements, including the need to be registered or file a prospectus.”