Wealthsimple Crypto - Client Relationship Disclosure
Wealthsimple Crypto enables Canadians to enter into a contract to safely and securely buy, sell, transfer, stake and hold crypto-assets. Wealthsimple Crypto is made available through the Wealthsimple Trade app. Wealthsimple Digital Assets Inc. (WDA) offers Wealthsimple Crypto to Canadians under time-limited registration and regulatory approach coordinated through the Canadian Securities Administrators' Regulatory Sandbox. WDA is registered as a restricted dealer. Crypto-assets purchased and held in an account with Wealthsimple Crypto are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.
The following is additional information concerning your relationship with WDA
Who are you trading with
When you open an account with WDA to purchase or sell crypto-assets, you enter into a contract with WDA that provides you with the right to buy, sell, transfer, stake and hold crypto assets. You will not enter into a contract to purchase or sell crypto-assets in your account with WDA’s affiliated custodial broker, Wealthsimple Investments Inc.
Who holds your cash
In order to purchase or sell crypto-assets in your account with WDA, you must also open a separate account with Wealthsimple Investments Inc.. WDA is not responsible for holding cash on your behalf. When you wish to purchase crypto-assets, you will instruct WDA to request cash from your account with Wealthsimple Investments Inc. in order to fund your purchase. When you sell crypto-assets from your account with WDA, the cash proceeds will be transferred by WDA to your account with Wealthsimple Investments Inc. There may be risk in permitting WDA to have access to cash in your Wealthsimple account, in the event that cash could be accessed improperly and misused. However, access to your cash is permitted only to settle buy transactions initiated by you.
Who holds your crypto-assets
Wealthsimple Investments Inc. does not hold any crypto-assets for you. Instead, WDA keeps all of the crypto-assets that you own in trust in one or more of Wealthsimple Crypto’s omnibus custodial accounts at third-party cryptocurrency custodians or in online “hot wallets” administered by us or a custodian. Custodians used by WDA are “qualified custodians” as defined by Canadian securities regulations and are regulated as trust institutions in their respective jurisdictions. For the purposes of facilitating transfers to and from external wallets, WDA also uses a third party hot wallet provider, Fireblocks. Custody of your crypto-assets with a third party may increase certain risks vs. you holding your assets on a private wallet. In particular, you may be exposed to insolvency risk (credit risk), fraud risk or proficiency risk on the part of WDA. You may also face risk in permitting WDA to have access to crypto-assets owned by you that are held with a third party custodian in the event that crypto-assets could be accessed improperly and misused. However, WDA’s access to your crypto-assets held with a third party custodian is permitted only to carry out transactions initiated by you.
Limitations on your ability to transfer crypto-assets
Until Wealthsimple Crypto makes transfer functionality available to you, there are limitations on your ability to transfer your crypto-assets into and out of your account at WDA. In simple terms, any crypto-assets that you purchase via Wealthsimple Crypto will have to be sold via Wealthsimple Crypto by default. At such time that Wealthsimple Crypto makes transfer functionality available to you, transferring crypto-assets from or to an external wallet presents risks that are outside of WDA’s control.
Investment risks for you to consider
WDA believes that its customers should be aware of the risks involved in the purchase, sale or staking of crypto-assets. Trading in crypto-assets may not be suitable for many members of the public. You should carefully consider whether trading is appropriate for you in light of your knowledge, experience, financial objectives, financial resources and other relevant material facts relating to your circumstances. Crypto-asset trading can be extremely risky. Crypto-asset trading may not generally be appropriate, particularly with funds drawn from retirement savings, borrowed assets, student loans, mortgages, emergency funds, or funds set aside for other purposes. Crypto-asset trading can lead to large and immediate financial losses. The volatility and unpredictability of the price of crypto-assets relative to fiat currency may result in significant loss over a short period of time. Please see the Wealthsimple Crypto Product Risk Disclosure for further details, available in your Documents tab in the app or on desktop.
You will not be able to engage in leveraged trading
You will not be able to enter into contracts that involve the use of leverage using Wealthsimple Crypto. WDA enables you to use your own cash to purchase a crypto-asset, and then custodies that crypto-asset for you. Crypto-assets are owned by you from the time of purchase until the time of sale. Crypto-assets owned by you may not be pledged, re-hypothecated or otherwise used in the business of WDA or its affiliates.
Conflicts of interest
WDA does not operate a marketplace nor does it engage in proprietary trading or market making. WDA may buy, hold and sell crypto-assets in its inventory for operational purposes, such as payment of network/transaction fees required to transfer crypto-assets, facilitating client sales and withdrawals, and testing. WDA will not take any long or short positions on crypto-assets for speculative or investment purposes.
WDA’s primary role is to buy or sell crypto-assets for clients and will manage the custody of all completed transactions with trusted third parties. WDA does not have any authority to act on a discretionary basis on behalf of clients. WDA has adopted policies, procedures and controls designed to mitigate any potential conflicts of interest that may arise from WDA earning revenue when you buy or sell crypto assets and any incidental profits from holding crypto assets for operational purposes.
Wealthsimple Crypto enters into agreements with third parties to arrange for clients to stake crypto assets. These third parties may pay Wealthsimple Crypto for arranging the staking of crypto assets with them. To mitigate this conflict of interest, Wealthsimple Crypto has adopted policies and procedures that the approval of these third parties and delegation of client crypto assets to these third parties must be made based on factors other than financial considerations under commercial agreements. The performance of these third parties is also assessed on a recurring basis.
Operating and transaction charges
WDA will earn revenue by applying a spread on the bid and ask prices at which buy orders and sell orders execute. Trading spreads are presented in the Wealthsimple Trade app. For illustrative purposes, if you place an order to buy $100 of bitcoin and the trading spread is 150bps, you will pay $1.50 for the transaction. This spread covers custodial expenses charged by our third party custodians and Wealthsimple business costs.
All blockchain transfers require the payment of fees (which may be referred to as miners’ fees, gas, network fees or otherwise) to entities unrelated to Wealthsimple Crypto. These fees are outside the control of Wealthsimple Crypto. When you transfer crypto assets from the Wealthsimple Crypto platform, WDA will provide you with an estimate of the fee. For crypto assets based on the ERC-20 token standard, if you proceed with the transfer, you will pay only the amount of WDA’s estimate and WDA will absorb or retain any difference between the amount of WDA’s estimate and the amount actually charged by the network to effect the transfer. Otherwise, you will pay the amount actually charged by the network.
WDA charges a fee for the staking functionality by deducting a percentage of staking rewards as they are earned.
WDA will not earn any other revenue from trading crypto-assets.
Compensation paid to WDA by a third party
Except as disclosed under the section “Conflicts of Interest” above, no compensation will be paid to WDA by any other party in relation to Wealthsimple Crypto.
From WDA, you will receive electronic trade confirmations and monthly statements setting out the details of the transaction history in your WDA account. From Wealthsimple Investments Inc., you will also receive electronic monthly statements setting out details of your transaction history relating to your cash balance from your non-registered brokerage account.
WDA will make available to you, at WDA’s expense, the services of the Ombudsman for Banking Services and Investments to resolve complaints made by you, if necessary. Wealthsimple will, as soon as possible after receiving a complaint, inform you of how to contact and use the dispute resolution service. See Wealthsimple’s complaint process.
Information we collect about you
To comply with certain regulatory requirements intended to protect investors, when you open your account, we will ask you to fill out a brief survey about your knowledge and experience with crypto-assets, your investing experience and your risk tolerance. We may require you to update or supplement this information from to time. In addition, you must also satisfy the “know your client” requirements set by WDA from time to time, which are designed to comply with the requirements set by applicable securities regulations and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations.
Historical Price Data
You will have access to historical pricing information and performance graphs and data for crypto-assets trading within the Wealthsimple Crypto app. This pricing information is sourced via third party API and Wealthsimple makes best efforts, but cannot guarantee, that the pricing information is accurate.
No advice or suitability recommendation
You acknowledge that WDA will not provide any advice to you and will not be responsible for making a suitability determination when accepting orders to buy, sell or stake crypto-assets. You alone are responsible for your own investment decisions and we will not consider your financial situation, investment knowledge, investment objectives, savings objectives or risk tolerance when accepting orders from you. WDA does not provide financial, legal, tax or investment advice or recommendations.