This document sets out important information
concerning our relationship with you. It contains information about Simply
Digital Technologies Inc. SDT (We, SDT or the Firm), the
services that we offer and your account with us. Other important information you
need to know about your relationship with us is contained in the Terms of
Service that you entered into on our website or mobile application (the CoinSmart
Platform), and other disclosures on the CoinSmart Platform.
AN OVERVIEW OF SIMPLY
DIGITAL TECHNOLOGIES INC.
SDT is registered as a restricted dealer in each
province and territory of Canada, subject to specific terms and conditions
contained in the exemptive relief decision Re Simply Digital Technologies
Inc., dated December 21, 2021, which
permit SDT to operate a crypto asset trading platform on which Canadian
residents can buy, sell and hold crypto assets (crypto) that have been
approved by SDT. As such, SDT may not be subject to all of the requirements
otherwise applicable to an investment dealer and a member of the Investment
Industry Regulatory Organization of Canada, including those that apply to
marketplaces and to trading on marketplaces.
THE PRODUCTS AND
SERVICES WE OFFER
The CoinSmart Platform does not list crypto that
are considered securities or derivatives under securities legislation in
Canada. However, because we hold crypto beneficially owned by you on your
behalf, your account with SDT is a “Crypto Contract” and is considered a
security or derivative in Canada.
In addition, the CoinSmart Platform offers a
central limit order book on which our clients trade crypto with each other and
with us under the terms of our Crypto Contracts, and we are therefore
considered to be a marketplace for securities or derivatives in Canada.
Before listing a crypto on the CoinSmart
Platform, we perform a product assessment by reviewing publicly available
information about the creation, governance and use of the crypto, the supply,
demand, maturity, utility and liquidity of the crypto, material technical risks
associated with the crypto and legal and regulatory risks associated with the
The CoinSmart Platform includes a Crypto Asset
Statement for every listed crypto here. We will update the Statement if there is a material change in
the crypto, including a change in the risk profile or a determination made by a
court or regulator that the crypto is a security or a derivative. If this
happens, we will de-list the crypto and you will be required to sell it or
withdraw it from the CoinSmart Platform.
On your behalf, we hold: (i) approximately 80%
of the crypto in “cold storage” custody accounts at Bitgo Trust Company (Bitgo)
and Coinbase Custody Trust Company (Coinbase Custody) (collectively, the
Crypto Custodians) and (ii) approximately 20% of the crypto online or
“hot” wallets secured by software provided by Fireblocks Inc. (Fireblocks).
Bitgo is a trust company organized under the laws of the state of South Dakota
and regulated as a trust company by the Division of Banking in South Dakota.
Coinbase Custody is a trust company organized under the laws of the state of
New York and regulated as a trust company by the New York State Department of
The Crypto Custodians maintains insurance over
its cold storage assets, however, the insurance may not be sufficient to cover
all losses. Clients and the Firm may have difficulty repatriating their crypto
on the bankruptcy or insolvency of the Crypto Custodians. The Firm has
performed due diligence on the Crypto Custodians, including considering the
nature of the regulation, status as a “qualified custodian” under Canadian
securities legislation, and sufficiency of equity of each Crypto Custodian, and
has concluded that Bitgo and Coinbase Custody are appropriate Crypto
The Firm licensed software from Digital Assets
Services Limited (trading as Coincover) (Coincover) to provide
additional security for keys to our Fireblocks hot wallets, including key pair
creation, key pair storage, device access recovery and account access recovery.
Coincover is based in the United Kingdom and is regulated by the U.K. Financial
Conduct Authority. The backup key material held by Coincover is 100% insured
against loss or theft by Lloyd’s of London. This insurance does not cover the
crypto held in our Fireblocks wallets, but rather the backup key material
maintained by Coincover.
We hold fiat cash currency on your behalf in
accounts at regulated financial institutions in Canada, the United States and
Switzerland (in each case, the Cash Custodian). Fiat is held at the Cash
Custodian separate and apart from SDT’s own assets.
The Crypto Custodians and the Cash Custodian
(together, the Custodians) are required to segregate client assets from
their own assets and are subject to regulatory oversight, minimum capital and
insurance requirements. Client assets are subject to risk of loss: (i) if a
Custodian becomes bankrupt or insolvent; (ii) if there is a breakdown in a
Custodian’s information technology systems; or (iii) due to the fraud, willful
or reckless misconduct, negligence or error of a Custodian or its personnel.
The Firm has reviewed each Custodian’s reputation, financial stability,
relevant internal controls and ability to deliver custodial services and has
concluded that such Custodian’s system of controls and supervision is
sufficient to manage risks of loss to client assets in accordance with prudent
Although client assets are generally held by a
Custodian, the Firm has access to client assets held online in hot wallets to
the extent necessary to facilitate trading on the CoinSmart Platform. We also
have access to client assets when accepting or making delivery of crypto or
cash in accordance with client instructions on a temporary basis. Finally, SDT
has access to client crypto held in trust on your behalf at the Crypto
Custodians because the custody account is in the name of SDT, in trust for our
clients. Client assets are exposed to risk of loss: (i) if there is a breakdown
in the Firm’s information technology systems; or (ii) due to the fraud, willful
or reckless misconduct, negligence or error of the Firm or its personnel. In
addition, the Firm is required under applicable securities laws to insure
against the additional risk of loss which arises due to its access to client
RISKS TO CONSIDER
WHEN MAKING AN INVESTMENT DECISION
Please see the CoinSmart Platform Risk Statement
for a description of the risks to consider when deciding to invest in crypto.
RISK OF USING
BORROWED MONEY TO FINANCE AN INVESTMENT
We do not lend money, extend credit or provide
margin to our clients.
You can pay for crypto on the CoinSmart Platform
using your credit card, however, the credit is being provided by your credit
card company, not by SDT.
Using borrowed money to finance the purchase of
crypto, including by using your credit card, involves greater risk than using
cash resources only. If you borrow money to purchase crypto, your
responsibility to repay the loan and pay interest as required by the terms of
the loan remains the same even if the value of the crypto purchased declines.
CONFLICTS OF INTEREST
We act as a passive liquidity provider on
the CoinSmart Platform (SDT LP) exclusively for the purposes of
providing liquidity to our clients. SDT may be a significant provider of
resting orders displayed on the CoinSmart Platform at any time.
orders based on the pricing available from its liquidity providers, plus a
“spread” on such trades, which is the positive difference between the price that
SDT pays for crypto assets from its liquidity providers and the price that SDT
charges to clients.
SDT may refuse to process or cancel trades
entered into with SDT LP, including the following circumstances: (a) to correct
an error caused by a system or technological malfunction of the CoinSmart
Platform’s systems or equipment or caused by an individual acting on behalf of
the CoinSmart Platform; or (b) if required by applicable law, including
compliance with anti-money laundering legislation, any court order, or the
request of any governmental authority.
Any complaint made by you in connection with an
order entered by, or trade executed with, SDT LP on the CoinSmart Platform,
will be escalated promptly to SDT’s Chief Compliance Officer (CCO) and
Chief Operating Officer (COO). The CCO and COO are authorised to conduct
an investigation and, if necessary, implement additional internal controls with
respect to the activities of SDT LP to prevent problematic conduct from
reoccurring on the CoinSmart Platform.
SDT operates a paid referral arrangement whereby
a client of SDT receives a one-time referral fee in consideration for referring
each new client to the SDT Platform. Each new client is provided with a
Referral Statement that identifies the possible conflicts of interest that may
arise in a paid referral arrangement. The Referral Statement is incorporated by
reference into this Relationship Disclosure Information.
COSTS ASSOCIATED WITH
SDT charges a fee for Trading, Deposits and
Withdrawals (Fiat and Crypto). Complete details are available on the CoinSmart
website at www.coinsmart.com/fees/.
SDT may also charge a 1% fee (minimum $15 CDN, or the equivalent in other
supported currencies on prevailing exchange rates determined by us at such
time) should you request a refund prior to executing your first trade on the
CoinSmart platform, full details available in the Terms of Service.
SDT may also earn a spread on trades, as
described above under “Conflicts of Interest”. The fees and spreads charged by
SDT covers the costs of the Crypto Custodians, our liquidity providers, and
operational overhead. This fee structure is posted clearly on our website and
agreed to when you complete a transaction and provided in the trade
confirmation that is emailed to you.
THE COSTS OF BUYING,
HOLDING AND SELLING CRYPTO
Other than the spread and withdrawal fees
described above, there are no costs directly paid by you associated with
buying, holding and selling crypto on the CoinSmart Platform.
When you buy, hold and sell crypto on the
CoinSmart Platform, we earn the spread and withdrawal fees described above.
REPORTING TO YOU
Information about your investments, including
trade confirmations, quarterly account statements, annual reports of charges
and compensation and investment performance reports, are available in your
account portal on the CoinSmart Platform. By entering into the Terms of
Service, you are consenting electronic delivery of all reports and documents to
which you are entitled to have delivered applicable securities law and under
your relationship with SDT. We will notify you when a document is available by
posting an electronic message in your account portal.
Annex A describes the dispute resolute service
available to you.
You may have a complaint relating to the conduct
of SDT LP which does not involve a claim for compensation. Issues relating to
the conduct of SDT LP may also be identified through SDT’s market surveillance
program. All complaints and issues relating to SDT LP will be escalated
immediately to SDT’s CCO and COO. The CCO and COO are authorised to conduct an
investigation and, if necessary, implement additional internal controls with
respect to the activities of SDT LP to prevent problematic conduct from reoccurring
on the CoinSmart Platform.
SDT performs an appropriateness assessment prior
to opening an account, on an ongoing basis and at least annually. SDT does not
give advice or recommendations regarding crypto, including the suitability of
We gather know your client (KYC)
information about your experience and knowledge in investing in crypto assets,
your financial assets and income, and your risk tolerance. We use this
information, together with our product assessments of all crypto that is listed
on the CoinSmart Platform, to determine whether an account is appropriate for
you. If we do not think an account is appropriate for you, we will send you a
prominent message that this is the case.
We also use your KYC information to recommend a
loss limit for your account, and we may remind you of your loss limit from time
to time. We won’t implement the loss limit by liquidating assets from your
account, however, you can enter stop loss orders at any time to implement your
loss limit. You should not rely solely on our reminders regarding your loss
limits. You are encouraged to independently monitor your account on an ongoing
basis so that you are fully aware of the value of your account and the terms or
losses of your investments.
We are required to determine that an account on
the CoinSmart Platform is appropriate for you and to put your interests first.
You should promptly advise us of any change to your KYC information that could
reasonably result in a change the appropriateness of your account, such as a
change to your financial assets and income or risk tolerance.