Issuers contemplating initial coin offerings (ICOs) would be wise to consider the recent decision of impak Finance Inc. (Impak) by the Autorité des marchés financiers’ and the Ontario Securities Commission. 

Background and Decision

Impak launched an ICO for impak Coin (MPK Tokens), which Impak describes as a cryptocurrency with a social purpose. The proceeds of the ICO are intended to fund the development of, an online social network 100% dedicated to the “impact economy”.

Prior to the launch of its ICO, Impak submitted its proposed business model to the Canadian Securities Administrators regulatory sandbox, an initiative introduced earlier this year aimed at supporting fintech businesses which intend to offer innovative products, services and applications in Canada. It is presumed that after consultation with the securities commissions in Québec, Ontario and elsewhere, Impak decided to treat MPK Tokens as securities and offer them to the public pursuant to prospectus exemptions.

The regulators stated that, in the absence of discretionary relief, the “first trade” of MPK Tokens, being the use of MPK Tokens for payment to a merchant, would be a “distribution” requiring the filing of a prospectus or reliance on an exemption. The regulators then granted discretionary relief from the dealer registration requirement and the prospectus requirement in respect of the first trades of MPK Tokens, provided that Impak:

  • conduct know-your-client and suitability reviews and verify accredited and eligible investor status
  • not provide investment advice
  • deal fairly, honestly and in good faith
  • establish policies and procedures to manage the risks of its business, including cybersecurity and conflicts of interest


The treatment of MPK Tokens as securities has serious implications for Impak including the cost of preparing a form compliant offering memorandum, filings and related fees payable to the securities commissions, conducting KYC and suitability reviews, and the preparation of audited financial statements on an annual basis.

Canadian companies considering ICOs should read the Impak decision carefully and keep an eye out for any further direction on ICOs provided by the regulators in order to reduce the risk of non-compliant offerings.

For additional commentary on the Impak decision, please refer to our corresponding Legal Update.

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