The United States Securities and Exchange Commission (SEC) gives a thumbs up to the blockchain-based startup Blockstack, to run a $28 million public token offering under Regulation A+, as per a report by The Wall Street Journal (WSJ) on June 10.
The startup will reportedly launch its token online on July 11. Notably, previously other firms have had taken advantage of Regulation A+ funding, however, this particular instance will be the first time investors will receive a token, rather than shares in the company.
An initial public offering (IPO), Regulation A+ is alternative geared towards startups in need of early funding. It was introduced in 2012 via the “Jumpstart Our Business Startups Act.” As per the report, any member of the public can participate in a Regulation A+ funding round.
With two tiers with hard caps on raised funds maxing out at $50 million within a 12-month period, Regulation A+ offers a more lenient disclosure obligations than a IPO. The report claims that purportedly a precedent-setting moment for the cryptocurrency ecosystem.
For some time now, Initial coin offerings (ICOs) have been on decline. Until the SEC started its ongoing crackdown citing investor-protection laws, various Crypto firms managed to raise billions of dollars through ICOs. The report quotes the research from TokenData, implying that ICO funding dropped from $6.9 billion in Q1 2018 to $118 million in Q1 2019.
Muneeb Ali and Ryan Shea, the founders of Blockstack has reportedly investes approximately $2 million and 10 months to gain approval from the SEC. Apparently, Ali added that Blockstack had to develop a protocol for running a regulated ICO through Regulation A+ from the ground up. Reportedly, Blockstart applied for SEC approval to run a $50 million token sale in April.
Some blockchain-based startups have had conducted token sales under SEC Regulation D, including Blockstart. Under Regulation D sales do not require SEC approval, though they are limited only to accredited investors, i.e. companies that hold a minimum of $5 million in assets and $1 million in its figures’ cumulative net worth.
Reportedly, Blockstart received $47 million through Regulation D funding in 2017, with an additional $5 million from venture-capital funding. As per WSJ, a crypto-based startup YouNow Inc. has also filed for a Regulation A+ funding round.
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