The information contained in this Crypto Asset Statement was last updated on August 15, 2022.
No securities regulatory authority in Canada has expressed an opinion about Balancer or any of the other Crypto Contracts or Crypto Assets made available through Newton Crypto Ltd. (Newton) on the Newton Platform, including an opinion that Balancer 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 without notice.
Newton is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Newton Crypto Ltd. dated August 15, 2022. The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Newton Platform Risk Statement.
This overview provides a summary of certain risks associated with Balancer and is not an exhaustive description or summary of these risks and, in addition, does not take into account an individual’s particular situation or risk tolerance. Investors are encouraged to conduct their own research prior to trading any crypto asset.
Newton users should read the Newton Platform Risk Statement for additional discussion of general risks associated with crypto assets made available through the Newton platform. A copy of the Newton Platform Risk Statement acknowledged by you is available in your account in the “Statements & Reports” section.
Token Description & Project Background
In 2018, Balancer was created by Fernando Martinelli, CEO of Balancer Labs, and Mike McDonald, co-founder of BlockScience. Balancer was created to serve as a non-custodial portfolio manager, liquidity provider, and automated market maker. Balancer runs on Ethereum and uses smart contracts to automatically invest in various cryptocurrencies, aiming to generate the highest return on an investment for a user. Balancer has been equated to an Index Fund where users have a broad exposure to assets with increased diversification to help manage risk. However, with traditional Index Funds, users are required to pay a fee to the fund’s manager for continuously trading stocks to rebalance and reflect the ever-changing index. With Balancer, there are no brokers and, instead, fees are collected from traders who rebalance portfolios by following arbitrage opportunities.
The native token of Balancer is BAL, which is also the protocol’s governance token. BAL can be earned by depositing cryptocurrencies into Balancer’s liquidity pool (also called liquidity mining).*
* Currently, Newton does not provide its users with the ability to participate in the governance and liquidity mining functions of BAL.
Risks of Balancer
Like an investment in other crypto assets, an investment in Balancer includes the following general risks: (i) volatility risk and liquidity risk, (ii) short history risk, (iii) demand risk, (iv) forking risk, (v) code defects, (vi) regulatory risk, (vii) electronic trading risk, and (viii) cyber security risk.
For additional information of general risks associated with crypto assets, you may refer to the Newton Platform Risk Statement. In terms of specific risks, as Balancer is one of the longest-standing crypto assets and its community base is widely decentralized, there is no central working group or authority to disclose material information to the public regarding Balancer.
Please note that these risks and the associated summaries or overviews provided for each herein are not intended to be an exhaustive discussion pertaining to all such risks and, in addition, there may be other risks that come with exposure to Balancer. We encourage all Newton users to perform their own due diligence to assess the risks associated with Balancer and to determine whether this level of risk is acceptable to them. Neither Balancer nor Newton guarantees the value of Balancer, and holders of Balancer will not have any recourse to Balancer or Newton if the value of Balancer declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed Balancer prior to making it available on the Newton Platform and has concluded that Balancer is not a security or derivative under Canadian securities legislation; however, there is a risk that this conclusion could change in the future and that, in such event, Newton will be required to halt, suspend, and then remove Balancer from its platform as described in the Newton Platform Risk Statement.
Further, as indicated above, no Canadian securities regulatory authority has expressed an opinion about Balancer, including an opinion that Balancer is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed Balancer, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of Balancer, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Balancer.
- The supply, demand, maturity, utility, and liquidity of Balancer.
- Material technical risks associated with Balancer, including any code defects, security breaches and other threats concerning Balancer and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them.
- Legal and regulatory risks associated with Balancer, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Balancer, and (ii) statements made by any securities regulatory authorities in Canada, other regulators in IOSCO-member jurisdictions, or the regulator with the most significant connection to Balancer about whether Balancer, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the Balancer White Paper is available at the following link.