Crypto Asset Statement - 1Inch

About this Statement

Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell 1Inch in reliance on a prospectus exemption granted by the Canadian Securities Administrators (CSA) in the exemptive relief decision dated October 12, 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 CSA jurisdictions do not apply in respect of a misrepresentation in this statement to the extent that a crypto contract is distributed under the above-noted prospectus relief.

No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about any of the crypto assets (or crypto contracts) that are available through Coinsquare’s platform, including an opinion that the crypto assets are not themselves securities and/or derivatives.

Coinsquare has compiled the information contained in this Crypto Asset Statement to the best of its ability based on publicly available information.

About 1Inch

1INCH is the governance token of the 1INCH DAO, which governs the 1Inch Network.(1) The 1Inch Network is a collection of financial protocols that are related and aim to improve finance-focused dApps. 1Inch Network was initially a protocol which aggregated exchange data from various DeFi exchanges, allowing users to find the most favourable venue for their execution. 1Inch also has liquidity protocol, which is an automated market maker (AMM) that aims to allow users to reduce slippage in trading and protect them from front-running. Additionally, 1Inch has a flexible limit order protocol which can be used by dApp creators on the Ethereum, BNB, or Polygon networks to implement limit orders into their dApps. Recently, 1Inch added a portfolio tracking protocol, which allows simple tracking of portfolios consisting of assets across multiple wallets on multiple chains.(2) Additionally, 1INCH tokens can be staked in the 1Inch Fusion protocol, which combines several other 1Inch protocols to create a DEX swap service that protects users against maximum-extractable value (MEV) attacks and aims to provide best execution through an entended execution period mechanism.(3)

Risks

As with all assets, investing in 1Inch is not without some general risks. Many of these risks are identified and explained in our Risk Statement.

The relevant sections in the Risk Statement are as follows:

Platform Risk, Short History Risk, Price Volatility, Potential Decrease in Global Demand for Digital Assets, Potential for Illiquid Markets, Transfers of Digital Assets are Irreversible, Concentration Risks, Uncertainty in Regulation, Financial Institutions May Refuse to Support Transactions Involving Digital Assets, Digital Assets’ Blockchain May Temporarily or Permanently Fork and/or Split, Cyber-Security Risk, Airdrops, Issues with Cryptography Underlying Digital Asset Networks, Internet Risk, Open Loop System, Risk if Entity Gains a 51% Share of Digital Asset Network, Possible Increase in Transaction Fees, Possible Increase in Service Fees, Limited Canadian Investor Protection Fund Account, No Voting Rights, Custody of Digital Assets, Custody Risk Insurance, Threats to Coinsquare’s Physical Assets, Covid-19 Outbreak, Use of Leverage, Halting, Suspending, and Discontinuing Digital Assets.

In addition to the general risks, we outline some risks that are specific to 1Inch below. While we make an effort to identify every source of risk, we encourage you to do your own research and ensure you are comfortable investing in 1Inch.

1INCH reliance on the Ethereum Network

Coinsqaure only supports 1INCH as an ERC20 token on the Ethereum network, therefore it is highly dependent on the continued stability of that network. Any fundamental issues in the Ethereum network may impact 1INCH’s smart contract or token value. Investors should consider this dependency, and the Ethereum network’s history with respect to stability, when evaluating 1INCH.

Concentration of 1INCH tokens with Core Contributors

When the 1INCH token was launched, the distribution chart showed that 22.5% of the total token supply was reserved for “Core Contributors” with a 4-year vesting schedule.4 Since the token was released in December 2020, by the end of 2024 all of this dedicated will have vested and be liquid. Investors should consider the implications of large token concentrations being held by a small group when evaluating 1INCH, with respect to the potential for a large liquidity event upon the completion of the vesting period.

1INCH "clone” sites, impersontators and scams

1INCH holders and 1Inch Network users have been the targets of various scam attempts throughout the past 3 years. In some cases, impersonator (“clone”) websites have been created with similar urls to true 1Inch Network products and have attempted to fool network users into clicking on the link to the clone site, where mechanisms exist to steal tokens from connected wallets. Additionally, as 1INCH was distributed to the public through airdrops, there have been attempts at fake airdrop or giveaway scams where a scammer tries to get users to click on a link to sign up for an airdrop, where the scammer deploys a smart contract in the user’s wallet which gives the scammer the ability to transfer funds out of the wallet. Investors should consider these potential scams and the potential affect on the market perception of 1INCH.

Coinsquare’s Due Diligence for Digital Assets

To be made available for trading on Coinsquare’s platform, a digital asset must pass the following due diligence reviews:

Coinsquare Securities Law Assessment
Coinsquare Digital Asset Security Audit
New Digital Asset Business Case

Coinsquare undertakes these three levels of due diligence in order to determine whether the digital asset is compliant with our legal and regulatory obligations, is secure, and has historical data supporting a beneficial business case. Coinsquare’s New Product Committee must provide final approval for a new digital asset to be made available on the platform.

References:

1Inch Network. “1INCH Token is Released”. 1Inch Blog. December 25, 2020. https://blog.1inch.io/1inch-token-is-released/
1Inch Network. https://1inch.io/
1Inch Network. “The 1inch Network releases a major upgrade, Fusion”. 1Inch Blog. December 25, 2022. https://blog.1inch.io/the-1inch-network-releases-a-major-upgrade-fusion/
1Inch Network. “1INCH token and liquidity mining announcement”. 1Inch Blog. August 21, 2020. https://blog.1inch.io/1inch-token-and-liquidity-mining-announcement/