Ontario Regulator Lets Security Token Startup Test Secondary Trading

The Ontario Securities Commission is allowing a tokenization startup to facilitate secondary-market trading of its tokens by giving the firm regulatory relief for a short time.

The trading would help TokenFunder, a startup that helps other firms raise funds through token sales, provide liquidity for investors, the regulator said.

Both TokenGX and TokenFunder run on the public ethereum blockchain, so initial token offerings, as well as secondary market trading transactions, are visible to anyone.

In October 2017, the OSC gave the startup relief from a dealer registration requirement and approved TokenFunder's initial token offering, which cleared the way for the offering of its FNDR tokens.

In April of this year, TokenGX became an exempt market dealer in Alberta, British Columbia, Ontario and Québec so it could operate its primary distribution platform, which distributes the tokens.

The secondary trading will take place on a platform developed by TokenGX called FreedomX and will be limited to sellers and purchasers who are residents of Ontario and have been whitelisted as investors who have gone through TokenGX's know-your-customer processes.

The regulator is also making investors pay for trades with "Settlement balance tokens" rather than fiat currency.

Token GX will buy and sell these tokens at a fixed price of one Canadian dollar.

FNDR tokens can be traded on the secondary platform, as can tokens issued by no more than ten Ontario-based issuers that have already issued tokens with TokenGX. These issuers' financial records have to be regularly reviewed by TokenGX as part of the pilot.

Token Funder is participating in Creative Destruction Lab's 10-month blockchain accelerator program, the filing noted.