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 Ethereum 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 Ethereum 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 Ethereum 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
Ethereum is an open-source platform with smart contract functionality that is used to create and run decentralized applications (dApps). It was founded in 2013 by Vitalik Buterin and developed together with Mihai Alisie, Anthony Di Iorio, Amir Chetrit, Charles Hoskinson, Gavin Wood, Jeffrey Wilcke, and Joseph Lubin. Buterin wrote the Ethereum whitepaper and published it in November 2013, with development work beginning in January 2014. Ethereum uses the Proof-of-Work (PoW) consensus mechanism to validate transactions and create new tokens on the Ethereum blockchain. dApps are digital applications that exist and run on a blockchain or Peer-to-Peer (P2P) network of computers, with no central entity having control over these applications. They are stored on a blockchain and are automatically executed when predetermined terms and conditions have been met and then verified.
Ether (ETH) is the Ethereum platform’s native token and is used to power the protocol and pay transaction fees on the platform. Ethereum governance occurs off-chain with a wide variety of stakeholders involved in the process and, therefore, ETH currently does not give any voting rights to its holders.
Currently, plans are in place to shift Ethereum’s consensus mechanism from Proof of Work to Proof of Stake. This upgrade is called The Merge, and is scheduled to take place in Q4 2022.
* Currently, Newton does not provide its users with the ability to participate in the staking of ETH to earn rewards or to participate in governance.
Risks of Ethereum
Like an investment in other crypto assets, an investment in Ethereum 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 Ethereum 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 Ethereum.
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 Ethereum. We encourage all Newton users to perform their own due diligence to assess the risks associated with Ethereum and to determine whether this level of risk is acceptable to them. Neither Ethereum nor Newton guarantees the value of Ethereum, and holders of Ethereum will not have any recourse to Ethereum or Newton if the value of Ethereum declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed Ethereum prior to making it available on the Newton Platform and has concluded that Ethereum 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 Ethereum 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 Ethereum, including an opinion that Ethereum is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed Ethereum, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of Ethereum, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Ethereum.
- The supply, demand, maturity, utility, and liquidity of Ethereum.
- Material technical risks associated with Ethereum, including any code defects, security breaches and other threats concerning Ethereum 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 Ethereum, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Ethereum, 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 Ethereum about whether Ethereum, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the Ethereum White Paper is available at the following link.