Crypto Asset Statement - Worldcoin

About this Statement

Coinsquare Capital Markets Inc. (“Coinsquare”) is offering crypto contracts to purchase and sell Worldcoin 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 Worldcoin

WLD is a token created by Sam Altman and OpenAI. It is a utility token and future governance token for the Worldcoin ecosystem. The utility aspect is still developing, as the Worldcoin team intends to develop future project proposals for the Worldcoin ecosystem via the token-based governance model; however the project is currently governed by the Worldcoin Foundation.(1) When it was originally launched, the Worldcoin ecosystem was intended to provided the basis for a universal-basic-income (UBI) system, however recently the project pivoted to focus on solving the issue of identifying real humans on the internet where bots are becoming ever-prevalent and the reach of artifical intelligence is growing. The Worldcoin network uses a physical device called an Orb to scan human retinas. The Worldcoin technology produces a unique hash for each retina, which can be used to recreate the image of that specific retina. The network then uses zero-knowledge proofs (ZKP) to verify that a unique hash exists for a given user, without exposing the hash, allowing users to verify that they are human without risk of exposing any of their private data.The Worldcoin token does not represent an equity, debt or any other type of claim on OpenAI.

Risks

As with all assets, investing in Worldcoin 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 Worldcoin 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 Worldcoin.

WLD reliance on the Ethereum Network

As WLD is an ERC-20 token on the Ethereum network, it is highly dependent on the continued stability of that network. Any fundamental issues in the Ethereum network may impact WLD’s smart contract or token value. Investors should consider this dependency when evaluating Worldcoin.

WLD uncertain total token supply

Worldcoin has a proposed supply cap of 10 billion tokens for the next 15 years, but has made it clear that the governance protocol can vote to raise this cap and implement token inflation mechanisms.

WLD dependence on WorldID verification

The Worldcoin ecosystem has a zero-knowledge ID proof system called WorldID which requires in-person enrollment that cannot be provided by Coinsquare and may not be available in Canada. Owning Worldcoin without a WorldID may limit a user’s ability to participate in tokenomics like airdrops. At this point in time, there are no known restrictions on governance or transacting in Worldcoin related to WorldID verification, but that does not mean that such restriction or requirement will not be introduced in the future.

Privacy concerns regarding WorldID data

Worldcoin’s system of human verification requires a retinal scan performed via physical device called an Orb. After scanning, humans can choose to allow worldcoin to store their retinal image data and use it to help their technology better learn to identify other retinal images. Authorities in France, Germany, Argentina, United Kingdom, Spain, and Kenya have taken some sort of action against Worldcoin including opening investigations, ordering the cesation of operations, or seizing warehouses relating to Worldcoin and its creators.(2, 3)

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:

“Worldcoin Tech Tree: Governance.” Worldcoin. 2024. https://worldcoin.org/tech-tree
Edd Gent. “Worldcoin Launched. Then Came the Backlash.” IEEE Spectrum. August 28, 2023. https://spectrum.ieee.org/worldcoin-2664361259
“Sam Altman’s eye-scanning Worldcoin banned in Spain.” Reuters. March 6, 2024. https://www.reuters.com/markets/currencies/spain-blocks-sam-altmans-eyeball-scanning-venture-worldcoin-ft-reports-2024-03-06/