Crypto Asset Statement for Bitcoin

Last updated on October 14th, 2023

OVERVIEW

No securities regulatory authority in Canada has expressed an opinion about Crypto Contracts or Bitcoin that are made available through 1Bitcoin Inc. (1Bitcoin.ca) on the 1Bitcoin Platform, including an opinion that Bitcoin 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/or without notice.

BACKGROUND

In 2008, an anonymous individual or group using the alias Satoshi Nakamoto introduced Bitcoin, a form of digital currency, via the Bitcoin Whitepaper. The year 2009 marked the launch of Bitcoin as open-source software, ushering in the era of decentralized digital money. Bitcoin operates without reliance on a central authority or governing entity, enabling direct peer-to-peer transfers among users over the Bitcoin network, without requiring intermediaries. Network nodes validate these transactions using cryptographic techniques and record them in a transparent and widely accessible ledger known as the blockchain.

In contrast to other cryptocurrencies, Bitcoin lacks a centralized development team and operates solely under the governance of a community of developers. The introduction of new Bitcoins into the system follows the “Proof-of-Work” protocol, where computers engage in competition to successfully solve a mathematical puzzle. The computer that first achieves the correct solution is rewarded with additional bitcoins. This operation of obtaining new bitcoins is commonly referred to as “mining”. For more information on Bitcoin as an asset and as a technology, we encourage you to visit our available resources on our website.

DUE DILIGENCE

Prior to the launch of 1Bitcoin.ca, due diligence was conducted and determined that Bitcoin is unlikely to be deemed a security or derivative under Canadian securities legislation. Our analysis included, but was not limited to, a review of the following publicly available information:

(i) The liquidity and market depth of the national and global Bitcoin markets, as well as the total market capitalization of Bitcoin as a whole. This includes the supply and demand of Bitcoin, and its maturity as an asset;

(ii) The creation, governance, usage, and design of Bitcoin, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Bitcoin;

(iii) Material technical risks associated with Bitcoin, including any code defects, security breaches, and other threats concerning Bitcoin and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;

(iv) Whether Bitcoin has been classified as a security or a derivative by any Canadian jurisdiction or the jurisdiction with which Bitcoin has the most significant connection; and

(v) Legal and regulatory risks associated with Bitcoin, including:

  1. any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Bitcoin; and

  2. statements made by any securities regulatory authorities in Canada, other regulators in IOSCO-member jurisdictions, or the regulator with the most significant connection to Bitcoin about whether Bitcoin, or generally about whether the type of crypto asset, is a security and/or derivative.

ADDITIONAL RISKS AND INFORMATION

Similar to all cryptocurrencies, Bitcoin carries inherent risks, which encompass aspects like volatility, liquidity, limited historical data, demand fluctuations, the potential for forks, coding imperfections, regulatory considerations, electronic trading vulnerabilities, and cybersecurity concerns. For further insights into the general risks associated with cryptocurrencies, please consult the 1Bitcoin.ca Platform Risk Statement.

As a reminder, this Crypto Asset Statement is not intended to be exhaustive of all risks associated with trading Bitcoin and we encourage you to conduct your own due diligence to determine whether trading Bitcoin is right for you.

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