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 MakerDAO 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 MakerDAO 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 MakerDAO 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
MakerDAO, which is part of the Maker Protocol, is a decentralized autonomous organization (DAO) that builds technology to facilitate borrowing and saving. It is an Ethereum-based open-source protocol that was created in 2014 and launched in 2017 by Danish entrepreneur Rune Christensen. The Maker Protocol, also known as the Multi-Collateral Dai (MCD) system, requires two types of tokens to function: DAI, which is a stablecoin whose value is pegged to the USD, and MKR, which cannot be mined and must be bought on centralized or decentralized exchanges. The Maker Protocol generates new DAI through smart contracts, called “Maker Vaults”, when a user locks in accepted cryptocurrency as collateral in order to take out a loan in DAI. When users are ready to recover their locked collateral, they may do so by repaying the borrowed DAI along with a stability fee.
MKR is an ERC-20 token and the platform’s native currency which is used to power the Maker protocol and pay interest rates (or “stability fees”) for the privilege of borrowing. MKR is also the Protocol’s governance token and grants rights to holders (such as staking and voting) which influences crucial decisions about the protocol (such as its stability fee). Users who hold MKR manage the Maker Protocol and the financial risks of DAI; however, the voting power of each user is dependent on the size of their MKR stake.
* Currently, Newton does not provide its users with the ability to participate in the staking and governance functions of MKR.
Risks of MakerDAO
Like an investment in other crypto assets, an investment in MakerDAO 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 MakerDAO 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 MakerDAO.
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 MakerDAO. We encourage all Newton users to perform their own due diligence to assess the risks associated with MakerDAO and to determine whether this level of risk is acceptable to them. Neither MakerDAO nor Newton guarantees the value of MakerDAO, and holders of MakerDAO will not have any recourse to MakerDAO or Newton if the value of MakerDAO declines for any reason whatsoever.
Newton’s Evaluation Process
Newton has reviewed and assessed MakerDAO prior to making it available on the Newton Platform and has concluded that MakerDAO 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 MakerDAO 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 MakerDAO, including an opinion that MakerDAO is not itself a security and/or derivative.
Based on publicly available information Newton has reviewed MakerDAO, including, but not limited to, a review of the following:
- The creation, governance, usage, and design of MakerDAO, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created MakerDAO.
- The supply, demand, maturity, utility, and liquidity of MakerDAO.
- Material technical risks associated with MakerDAO, including any code defects, security breaches and other threats concerning MakerDAO 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 MakerDAO, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of MakerDAO, 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 MakerDAO about whether MakerDAO, or generally about whether the type of crypto asset, is a security and/or derivative.
A link to the MakerDAO White Paper is available at the following link.