Dominion Bitcoin Mining Company Ltd., based in Saskatchewan, Canada, faces a possible $10,000 CDN fine for allegedly pursuing investors without proper registration, reports the Regina Leader-Post.
From May until early September of this year, Dominion was under a cease-trade order issued by the Saskatchewan Financial and Consumer Affairs Authority (FCAA). The Leader-Post reports that the order expired without any penalty being issued, but the FCAA has since accused the company of multiple violations of the Securities Act of 1988, including that Dominion’s website included statements that the firm’s three shareholders “knew or reasonably ought to have known were misleading or untrue.” The FCAA also alleges that Dominion engaged in the business of trading in securities and not having a prospectus to show possible shareholders.
Dominion president Peter Voldeng told the Leader-Post this week that the FCAA does not understand Bitcoin, and that his firm will be fully vindicated when the authority’s allegations are dealt with through a hearing, which has been adjourned until December 2.
“Bitcoin isn’t a security,” Voldeng told the newspaper. “If they say it’s a security, they would be the first government in the world to give Bitcoin that sort of value or endorsement.”
When the cease-trade order was lifted in September, Voldeng told the CBC at the time that from his perspective, Bitcoin does not fall under the FCAA’s jurisdiction.
“They have absolutely no idea what bitcoin is,” he said in September. “It may have been that they thought bitcoin was a security that they could regulate.”
“A security that is regulated tends to be backed by government regulation … whereas bitcoin is not regulated by any government but is more a purchase of a service for a product. People use it as a currency.”
Dominion’s website was down as of Wednesday, reports the Leader-Post. Voldeng told the newspaper that Dominion is seeking a new Web hosting service. He added that the company is looking to broaden its operations in other aspects of digital currency, such as Bitcoin ATMs or online wallets.
The Leader-Post reports that in response to the FCAA’s cease-trade order in May, Jason Dearborn, who is the chairman of Dominion’s board of governors, said the company was not taking cash investment from anyone but was considering the possibility of Bitcoin trading. He said Bitcoin transactions are outside of securities commission regulations.
But according to the FCAA, the currency used in the transaction is irrelevant, reports the Leader-Post, which notes The Securities Act of 1988 defines trading as any transfer, sale or disposition of a security for valuable consideration.
“Whether Canada or the banks or anyone else has assigned a value to the Bitcoin yet is neither here nor there,” Dallas Smith, the FCAA Securities Division’s legal counsel, said in May. “It is valuable consideration, obviously. They’re exchanging shares for it.”