Crypto Asset Statement - Sei

About this Statement

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

SEI is the native token of the Sei blockchain. Sei is a proof of stake network that executes smart contracts in a decentralized manner, with a focus on order book exchange infrastructure. Like Injective and Celestia, Sei is built using the Cosmos SDK and employs a unique consensus mechanism, called Twin Turbo, based on the standard Tendermint algorithm. Sei aims to solve issues of speed, cost, throughput, and scalability with its technology. The SEI token can be staked to secure the network and earn rewards, and token balances can be used to vote on governance proposals.(1)

Risks

As with all assets, investing in Sei 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 Sei 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 Sei.

Sei relation to the Cosmos Network

Although Sei is a layer-1 blockchain, it is heavily intertwined with the Cosmos Network. Celestia was developed using the Cosmos SDK, and it utilizes Twin Turbo consensus mechanism, which is based on the Tendermint algorithm.(2) While native SEI and the Sei blockchain are not reliant on the Cosmos network as an ERC20 token is reliant on the Ethereum network, there are still clear links between Sei and Cosmos as explained above. This relation between the two networks could have the potential to impact market price of either asset based on news or movements in the other asset. Potential investors should be aware of the link between Sei and Cosmos and consider this when evaluating SEI for investment.

Competition amongst other layer-1 blockchains

Sei is one of many new layer-1 blockchains that aim to solve the problems of transaction cost, transaction throughput, scalability, and speed that exist with older blockchains. These new networks are in direct competition with each other for similar activity and often employ similar solutions to the same problems listed above. For example, Celestia, Injective, and Sei are all built on the Cosmos SDK, using common elements of Tendermint Core, aim to solve similar problems using different technological solutions, with a native token that is stakeable. Potential investors should be aware of the competition among layer-1 networks and consider this when evaluating SEI.

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:

Kyrian Alex. “A guide to understanding Sei Network: The first order-book-focused L1 blockchain.” Medium. November 28, 2022. https://medium.com/coinmonks/a-guide-to-understanding-sei-network-the-first-order-book-focused-l1-blockchain-9cac7317ba54
MacroMark.Eth. “Sei Twin-Turbo, A Consensus Engine Review.” 3V Labs. April 18, 2023. https://mirror.xyz/3vlabs.eth/VpOehMkSE2lxMLA93WCchKBVBId3RdhUdrSPT88TPdk