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On Sept. 12, Waterloo, Ont.-based Kik Interactive Inc., which operates a popular messaging app of the same name, will grant investors who preregister a chance to buy a chunk of its new cryptocurrency, called Kin.

Canadian tech startup Kik Interactive Inc. says it won't be allowing Canadian residents to participate in the initial sale of its new cryptocurrency because of unclear rules from Ontario's securities watchdog.

The Waterloo, Ont.-based company, which operates a popular messaging app, will start selling its new cryptocurrency, called Kin, to investors on Sept. 12.

The fundraising initiative is similar to an initial coin offering, or ICO, an emerging method of raising cash that has allowed some companies to raise tens of millions of dollars in minutes. However, the company said the sale is not an ICO but a "token distribution event" (TDE).

Last month, the Canadian Securities Administrators published a notice that said regulators will determine on a case-by-case basis whether a particular "coin" or "token" offering constitutes a security and will be subject to investor protection laws.

Kin said in a statement Thursday that it has decided to exclude Canadian residents from the upcoming token sale because of "weak guidance" from the Ontario Securities Commission.

"Despite setting up Kin to have one of the most fair TDEs to date, and despite our best efforts to work with the OSC, they have failed to give us clear direction on when Canadian securities law will or, more importantly, will not apply," the company said.

"Our Kin project needs to move forward, so to avoid risks arising from this uncertainty, we, a Canadian company, have decided to move forward without Canada."

The company noted that interested investors will be able to join the project later through the secondary market, but they will not be able to participate in the initial token distribution.

Kik says 15,000 people from more than 130 countries have registered to participate in the sale. The aim of the token offering is to raise some extra cash and possibly allow the company a way to monetize its users' behaviour other than selling advertising in chat feeds.

The OSC said in a statement that it has been in talks with Kik in recent weeks and has told the company that in the regulator's view their offering constitutes a security and would require an exemption.

"We have also indicated that we are open to discussing flexible approaches to exemptive relief, provided there are investor protection measures in place for retail investors," the OSC said in a statement.

"We continue to be open to such a discussion, and want to work with Kik to ensure that all investors, including Canadian investors, can participate in the offering with appropriate protections."

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