Crypto Asset Statement - Pepecoin

About this Statement

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

PEPE is a memecoin that has no real utility or associated protocol. It exists to allow holders to participate in the meme culture surrounding the Pepe frog meme, originally illustrated by cartoonist Matt Furie. Pepe the frog has been a longstanding internet meme, gaining popularity on various internet forums over many years. Pepecoin is another instalment in the saga of memecoins, following in the foot steps of Dogecoin, Shiba Inu, and other dog-related coins.

Risks

As with all assets, investing in Pepecoin 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 Pepecoin 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 Pepecoin.

PEPE reliance on the Ethereum Network

As PEPE 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 PEPE’s smart contract or token value. Investors should consider this dependency when evaluating Pepecoin.

Pepecoin and the Nature of Memecoins

Pepecoin is one of many digital assets that could be classified as a memecoin. Memecoins follow internet trends and are susceptible to volatility influenced by social media activity, online jokes, and adoption or comments by celebrities or public figures. However, as with typical internet memes, trends may be fleeting and those steep increases could level off very quickly as meme-followers lose interest.1

PEPE Founders Dump Reserved Holdings

In August 2023, a large amount (approximately $15M worth) of PEPE tokens were moved from the Pepecoin founders’ multisig wallet to various centralized exchanges. When this movement of tokens was noticed by news outlets, the price of PEPE dropped significantly. After news broke, the PEPE twitter account posted, claiming that these tokens were stolen by disgruntled developers, but since their exit from the project the multisig wallet had been updated, no longer giving those former developers access. Following this incident, the price of PEPE continued to fall with negative sentiment growing within the Pepecoin community. As a result, in October 2023 the remaining Pepecoin developers announced that a new team of advisors has been brought on to help guide the Pepecoin community, and that 6.9 trillion tokens (approximately $6M worth) had been burned and permanently removed from the total token supply.² Potential investors should consider this series of events and make their own determination about the potential implications when evaluating Pepecoin.

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:

John Bogna. “What Is a Meme Coin and How Do They Work?” PC Mag. December 20, 2021. https://www.pcmag.com/how-to/what-is-a-meme-coin-how-do-they-work
Margaret Rouse. “Pepcoin (PEPE).” Techopedia. Ocotber 26, 2023. https://www.techopedia.com/definition/pepe-coin-pepe