What is Stellar?

Stellar is an open-source network for cross-border transactions between currencies. Stellar makes it possible to issue, send and trade any assets, including stocks, currencies, cryptoassets at a low cost. Assets on Stellar are issued and redeemed by anchors, who are trusted entities that issue digital credits on the Stellar network in exchange for deposits of the asset with the trusted entity. Anchors enable real world assets to be exchanged on Stellar by leveraging a distributed exchange that maintains an order book for every asset pair.

Stellar was launched in 2014 by Jed McCaleb and Joyce Kim Stellar. The Stellar Development Foundation (SDF) is a non-profit organization founded in 2014 to support the development and growth of the Stellar network. Although the community can make independent proposals to the protocol and vote, the SDF team ultimately decides which proposals are accepted, thus performing an important role in the development of the network.

100 billion lumens were initially created and its supply increased by 1% annually for the first 5 or so years. That inflation mechanism was ended by community vote in October 2019 and in November 2019, the overall lumen supply was reduced through burning. There are currently around 50 billion lumens in existence, and no more lumens will be created.

What is XLM?

The Lumen (XLM) is Stellar’s cryptocurrency and is used a medium of exchange within Stellar network. XLM is used to pay transaction fees. Every account in the Stellar network most hold a minimum of 1 XLM to ensure authenticity. XLM also acts as a bridge currency within the Stellar Distributed Exchange, as the only asset in the network that does not require an anchor, allowing it to pair with any other asset to provide liquidity.

Risk statement

Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.

No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform. 

Wealthsimple has performed an assessment of whether XLM can be supported by Wealthsimple’s platform, including whether XLM is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.

We evaluated XLM based on publicly available information, including (but not limited to):

• The creation, governance, usage and design of XLM, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Stellar;
• The supply, demand, maturity, utility and liquidity of XLM;
• Material technical risks associated with XLM, including any code defects, security breaches and other threats concerning XLM and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
• Legal and regulatory risks associated with XLM, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of XLM; and
• Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether XLM, or generally about whether the type of crypto asset, is a security and/or a derivative.

Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to XLM may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support XLM.

Like all other crypto assets, there are some general risks to investing in XLM. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading XLM. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision). 

The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.

 

Last updated: January 1, 2024