What is an investment limit, how is it calculated, and what happens to your account if the limit is reached?

As part of our commitment to regulatory compliance and ensuring a safe trading environment, we are implementing certain investor protection measures in connection with the Pre-registration Undertaking (PRU) dated March 23, 2023, that Ndax Canada Inc. (Ndax, we, us, or our) entered into in favor of the Alberta Securities Commission and the other members of the Canadian Securities Administrators. One of these measures is an investment limit imposed on a user’s account. This support article aims to provide a summary description of the investment limit applied to user accounts and how such limits are calculated.

The investment limit refers to the maximum allowable net acquisition cost of crypto assets (or value-referenced crypto assets (also referred to as stablecoins) that are offered on the Ndax platform within a 12-month period. The aim of setting an investment limit on the investing of crypto assets is to protect investors from excessive risk and potential financial harm.

The investment limit is set at a maximum of $30,000 in net acquisition cost. This means that the total value of crypto assets (with a few exceptions, please see below) acquired within the preceding 12 months should not exceed $30,000. It is important to note that the investment limit applies to users who are residents of specific provinces and territories, namely:

• New Brunswick
• Newfoundland and Labrador
• Nova Scotia
• Ontario
• Prince Edward Island
• Northwest Territories
• Nunavut
• Yukon

However, the investment limit does not apply to users who are residents of Alberta, Saskatchewan, British Columbia, Manitoba, and Québec. Users residing in these provinces do not have specific investment limits imposed on them.  

The investment limit does not apply to Bitcoin, Ethereum, and Litecoin. There are no specific limits for these three widely recognized crypto assets. Therefore, users can freely acquire and trade Bitcoin, Ethereum, and Litecoin without being subject to the investment limit.

The Canadian Securities Administrators have not yet indicated which value-referenced crypto assets (also referred to as stablecoins) will be able to be traded on platforms in Canada. If USDC is permitted, it is expected that the investment limit will not apply to it.

The investment limit is calculated based on the net acquisition cost of crypto assets. Net acquisition cost is determined by adding all the purchased crypto assets that you have made in the previous 12-month period and subtracting the total disposals or sales of crypto assets from the total cost for the same period, provided that it cannot be less than zero. Please note that the crypto assets identified as exempted assets are excluded when calculating investment limits.  

For additional clarity, deposits or withdrawals (or staking reward payments, in connection with the staking services that Ndax offers) will not affect your investment limits for a 12-month period. Only purchases and sales on the Ndax platform will be considered for determining the calculation under the investment limit, and appreciation or depreciation of previously acquired assets will have no impact.

If your account reaches the investment limit, the following actions will be taken:

• Trading Restrictions: Once the investment limit is reached, a user will no longer be able to purchase additional crypto assets on the Ndax platform, except for Bitcoin, Ethereum, Litecoin, and, possibly, USDC. Users will still have the ability to sell any crypto asset in their account, regardless of the investment limit.
• Account Monitoring: While the ability to purchase crypto assets other than Bitcoin, Ethereum, Litecoin, and, possibly, USDC, is restricted, user accounts will remain active. Users can continue to monitor their existing holdings and track the performance of the portfolio in their accounts. This allows users to stay informed about the value and status of their current investments during the restriction period.

To stay within the investment limit, it is crucial for users to keep track of their net acquisition costs. Ndax provides users with information on the current amount available under the investment limit in a user’s account settings on the Ndax platform. Ndax strives to provide users with all the information required to stay informed and within the established investment limits.

At Ndax, we prioritize the security and compliance of our trading platform. We remain dedicated to providing a transparent and regulated environment that promotes responsible trading practices. Should you have any questions or require further clarification regarding the investment limit or related matters, our dedicated customer support team is available to assist you.

Under the terms of the PRU, Ndax is required to impose investment limits on users based on certain crypto assets purchased during a specified period in certain jurisdictions of Canada. Ndax monitors user accounts and the Ndax platform provides users with tools to track the value of crypto assets in their account and the amount available under the investment limit during the specified period

Please note that Ndax Canada Inc. has submitted an application for registration under securities legislation in Canada, but is not currently registered, and is operating under the provisions of a pre-registration undertaking (PRU) dated March 23, 2023, entered into favor of the Alberta Securities Commission and the other members of the Canadian Securities Administrators. There can be no assurance that Ndax will be registered and if it fails to become registered in any province or territory in Canada, it will promptly cease carrying on registrable activity in such province or territory.