A Non-fungible token (“NFT”) is a type of digital asset that uses blockchain technology or other distributed ledger technology (DLT) to provide objects (e.g., art, music, videos or other digital content or tangible assets) with unique identification codes and metadata (i.e., data that describes other data).

Non-fungible means that each token is unique and tokens are not interchangeable, comparatively to cryptoassets which are fungible.

For the time being, Canadian securities laws are silent on the subject and definition of these assets.

Indeed, the Canadian Securities Administrators’ (“CSA”) Staff Notice 46-308: Securities Law Implications for Offering Tokens provides guidance on how to determined when an offering of tokens constitute a distribution of securities – i.e., tokens are investment contracts when they involve:

1. An investment of money

2. In a common enterprise

3. With the expectation of profit

4. To come significantly from the efforts of others

Although NFTs only meet the first and second criteria.