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The information contained in this Crypto Asset Statement was last updated on March 15, 2024.

No securities regulatory authority in Canada has expressed an opinion about Stellar Lumens 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 Stellar Lumens 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 March 8, 2024.  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 Stellar Lumens 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

Stellar is a decentralized Peer-to-Peer open network designed to store and transfer money that was a fork from the Ripple protocol.  It was created by Jed McCaleb and Joyce Kim in 2014 primarily as a payment system to facilitate cross-border payments (and currencies) more quickly and economically than with traditional financial system networks.  Through Stellar, users are able to create, send, and trade digital representations of all forms of currency (both fiat and digital) by providing users with the ability to digitally recreate any asset as a Stellar token.  These tokens can then be used to transact on the blockchain and be redeemed at any time for the base asset.

XLM (or Lumens) drives movement on the Stellar network by converting traditional currencies to XLM which is then sent through the blockchain and reconverted to the desired currency at the best current exchange rate.  XLM is envisioned to be particularly useful in developing markets where it has the potential to serve as a low-cost bridge for cross-border transactions, allowing users to send and receive payments in their preferred currency.

Risks of Stellar Lumens

Like an investment in other crypto assets, an investment in Stellar Lumens 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 Stellar Lumens 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 Stellar Lumens.

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 Stellar Lumens.  We encourage all Newton users to perform their own due diligence to assess the risks associated with Stellar Lumens and to determine whether this level of risk is acceptable to them.  Neither Stellar Lumens nor Newton guarantees the value of Stellar Lumens, and holders of Stellar Lumens will not have any recourse to Stellar Lumens or Newton if the value of Stellar Lumens declines for any reason whatsoever.

Newton’s Evaluation Process

Newton has reviewed and assessed Stellar Lumens prior to making it available on the Newton Platform and has concluded that Stellar Lumens 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 Stellar Lumens 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 Stellar Lumens, including an opinion that Stellar Lumens is not itself a security and/or derivative.

Based on publicly available information Newton has reviewed Stellar Lumens, including, but not limited to, a review of the following:

• The creation, governance, usage, and design of Stellar Lumens, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Stellar Lumens.
• The supply, demand, maturity, utility, and liquidity of Stellar Lumens.
• Material technical risks associated with Stellar Lumens, including any code defects, security breaches and other threats concerning Stellar Lumens 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 Stellar Lumens, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Stellar Lumens, 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 Stellar Lumens about whether Stellar Lumens, or generally about whether the type of crypto asset, is a security and/or derivative.

A link to the Stellar Lumens White Paper is available at the following link.