The First-ever Digital Token Offering is Approved by the SEC
The big news for the blockchain and cryptocurrency community this week is the Security and Exchange Commission (SEC) clearing Blockstack to hold the first-ever digital token offering. The $28 million offering under Regulation A+ may pave the way for crypto start-ups raising funds in a new way sanctioned by the SEC, and result in a wave of new opportunities.
According to Blockstack, a decentralized computing platform and app ecosystem, which is run by a group of distributed system PhDs, their tokens, called Stacks (STX), should allow developers to build and distribute apps that let users maintain ownership of their data and protect their digital rights. STX can be used to register digital assets or execute smart contracts. Blockstack has previous fundraising experience . The company raised $47 million through a previous token offering under Regulation D, a different provision that does not require SEC approval but is only limited to accredited investors.
The Regulatory Environment and the SEC
Poor performance and fraud concerns have been discouraging stock exchanges from listing Reg A+ IPOs. After a few years of regulatory uncertainty, the SEC recently started enforcing compliance with existing securities laws. As the agency launched several crackdowns on unregistered initial coin offerings (ICOs) like those behind PlexCoin, many blockchain projects have found themselves in limbo unwilling to proceed with their fundraising plans. As a result, the regulatory environment has been blamed by industry experts for stifling technological progress and innovation.
What is Regulation A+?
Regulation A+ is a fast track for small companies to publicly raise money with less demanding requirements and disclosure standards than a standard initial public offering involves. What is great about Regulation A+ is that it is open to all investors – companies and individuals, diversifying the investor pool and democratizing the investment process. Our recent conversation with attorney Katya Fisher shed some light on the SEC requirements for offerings of cryptocurrency and tokens.
Why This is Important
With Blockstack successfully following this new path for blockchain companies to raise capital, more companies may be encouraged to pursue SEC approval for their token offerings instead of trying to circumvent the regulator arguing that their tokens are not securities. This should help legitimize the industry and create new investment and innovation opportunities in the space.