About this Summary

Ndax Canada Inc. (“Ndax”, “we” and “our”) believes that our users should understand the crypto assets that they are able to trade and stake using our crypto trading platform (the “Platform”). One of the crypto assets we offer on the Platform is USDC, a value-referenced crypto asset (“VRCA”), which is designed to maintain a stable value over time by referencing the value of the US dollar. We created this summary to help you understand the basics of USDC as well as some of the risks involved in trading in USDC. While we tried to describe the key features of USDC, this summary isn’t meant to tell you everything you’d want to know before investing in USDC. You should also do your own research on USDC to make sure you are comfortable investing in it.  

Description of USDC

History of USDC

First issued in October 2018, USD Coin, or USDC, was developed by a consortium called Center. This consortium includes members from leading platforms, like Coinbase and Bitmain, with its founder being Circle, a peer-to-peer payments technology company. USDC was first launched as an ERC-20 token on the Ethereum network and slowly spread to other networks, like Solana, Algorand, Stellar, and Tron.

USDC was mainly created to address the issues of volatility and fiat-crypto convertibility prevalent in the crypto market. Every USDC in circulation is backed by an actual US dollar or other approved investments with an equivalent value, all of which are held in reserve. USDC quickly became the VRCA of choice for users of several DeFi platforms.

What is USDC used for

The primary use case for USDC is to enable users to easily store funds in the form of a cryptocurrency and use it to execute trades across DeFi platforms. USDC holders can also use it to fund liquidity pools on DeFi protocols and earn interest on the same.

Due to its price stability, USDC also provides an on-ramp for new users to enter the decentralized framework without worrying about volatility. Furthermore, USDC is becoming a popular means for instant and cheap cross-border payments.  

How USDC works

USDC is a fiat-collateralized VRCA that is pegged to the US dollar on a 1:1 basis. Qualified persons who wish to mint USDC deposit fiat US Dollars on an issuer platform backed by the Center consortium. The issuer creates a smart contract and holds the fiat in reserve to create an equivalent amount of USDC tokens.

In case these customers wish to redeem their fiat, they can deposit back the USDCs on the issuer platform, where they are burned to release the US dollars to the customer’s account.

Risks

Before entering into an agreement (a “Crypto Contract”) with Ndax to buy or sell any VRCA through the Platform, it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a VRCA.

Like other crypto assets, there are some general risks associated with investing in USDC. Each of these risks is described in more detail in the Risk Statement provided to you at the time that you open your account with us and is also available online on the Ndax website and app. You should review the Risk Statement.

In addition to the general risks set out in the Risk Statement, we also point out other specific risks to USDC below.  

While we tried to describe the key risks associated with USDC here and in our Risk Statement, we emphasize that this Value-Referenced Crypto Asset Statement is not exhaustive of all of the risks associated with trading in USDC. You should also do your own research on USDC to make sure you are comfortable investing in such a VRCA.

Loss of Value on Failure to Perform

A failure of USDC to perform according to expectations (i.e., by being issuable/redeemable in exchange for U.S. dollars) would harm its users and could pose systemic risk. The mere prospect of USDC not performing as expected could result in a “run”– i.e., a self-reinforcing cycle of redemptions and fire sales of reserve assets.

Payment System Risks

USDC faces many of the same basic risks as traditional payment systems, including credit risk, liquidity risk, operational risk, risks arising from improper or ineffective system governance, and settlement risk.

Regulatory Information  

Ndax is offering Crypto Contracts in accordance with the terms of a pre-registration undertaking (“PRU”) dated March 23, 2023, that we entered into with the Canadian securities regulators, while our application for registration in certain Canadian jurisdictions is reviewed. Please note that Ndax is not currently registered under securities or derivatives legislation of Canada and there is no guarantee that registration will be granted.

The statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply in respect of a misrepresentation in this Value-Referenced Crypto Asset Statement.

Canadian securities regulators have expressed an opinion about VRCAs, and other stablecoin arrangements, including that VRCAs may constitute securities and/or derivatives. Notwithstanding this opinion, in accordance with the terms of the PRU, Ndax has obtained written consent from Canadian securities regulators to permit Ndax to allow users to enter into Crypto Contracts to buy, sell, and deposit USDC.  However, Canadian securities regulators could revoke this consent in the future, and, in such an event, users holding USDC may be required to liquidate their positions, potentially at a significant loss. In the event that USDC is no longer permitted to be traded on the Platform, users holding positions in USDC will be notified via the Platform or other electronic means and advised of the options available to them and any applicable period to sell or withdraw their positions in USDC.