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 Wrapped Bitcoin 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 Wrapped 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 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 Wrapped Bitcoin 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
Wrapped Bitcoin is a tokenized version of Bitcoin, designed to run on the Ethereum network. It complies to the ERC-20 token protocol, and allows users to gain exposure to various DeFi protocols, and decentralized lending and yield generating applications. Wrapped Bitcoin is backed by Bitcoin at a 1:1 ratio, and uses a network of automatically monitored custodians and marketplaces ensuring this peg is always maintained. Wrapped Bitcoin was founded from the joint effort of Bitgo, Kyber Network, and Ren, three well known, reputable organizations in the crypto sphere.
Wrapped Bitcoin’s token, WBTC, is always redeemable at a 1:1 basis for Bitcoin, and is supported across multiple protocols such as Ethereum, Avalanche, Polygon, Solana, Fantom, Harmony, and Arbitrum.
Risks of Wrapped Bitcoin
Like an investment in other crypto assets, an investment in Wrapped Bitcoin 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 Wrapped Bitcoin 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 Wrapped Bitcoin.
As Wrapped Bitcoin is a derivative token, which is a token whose value depends on the value of another crypto asset (that is not a stablecoin), namely Bitcoin, which is a “wrapped” crypto asset issued against Bitcoin that is being staked, there is a risk that Wrapped Bitcoin becomes “depegged” from Bitcoin. Such depegging events can happen for a variety of reasons including, but not limited to, liquidity issues, problems with the protocol, a cybersecurity breach, etc. In the event of such depegging, the value of Wrapped Bitcoin may decline significantly or could even go to zero.
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 Wrapped Bitcoin. We encourage all Newton users to perform their own due diligence to assess the risks associated with Wrapped Bitcoin and to determine whether this level of risk is acceptable to them. Neither Wrapped Bitcoin nor Newton guarantees the value of Wrapped Bitcoin, and holders of Wrapped Bitcoin will not have any recourse to Wrapped Bitcoin or Newton if the value of Wrapped Bitcoin declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed Wrapped Bitcoin prior to making it available on the Newton Platform and has concluded that Wrapped Bitcoin 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 Wrapped Bitcoin 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 Wrapped Bitcoin, including an opinion that Wrapped Bitcoin is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed Wrapped Bitcoin, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of Wrapped 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 Wrapped Bitcoin.
- The supply, demand, maturity, utility, and liquidity of Wrapped Bitcoin.
- Material technical risks associated with Wrapped Bitcoin, including any code defects, security breaches and other threats concerning Wrapped Bitcoin 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 Wrapped Bitcoin, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Wrapped Bitcoin, 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 Wrapped Bitcoin about whether Wrapped Bitcoin, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the Wrapped Bitcoin White Paper is available at the following link.