SEC softens its grip over token offerings

July 17, 2019, | AtoZ MarketsThe U.S. Securities and Exchange Commission (SEC) has green-lighted two token offerings under Regulation A+, marking a significant event in the crypto industry’s history. 

About the new players in the token offerings industry in a brief 

As per the U.S. Securities Act of 1933, companies seeking to offer or sell securities must either register the offer and sale or qualify for a registration exemption, such as under Regulation A (Reg A+).

The final rules often referred to as Reg A+ were adopted by the U.S. Commission and became effective in 2015 aimed at facilitating small companies’ access to capital.

Notable, that since that date until now, the US SEC has not approved any token issuers’ Reg A+ applications. 

According to the media reports, the U.S. financial authority started qualifying token offerings under Regulation A+ (Reg A+) last week. 

The regulator has granted Reg A+ qualification for Blockstack PBC Stacks tokens and Younow Props tokens. 

Blockstack PBC is a public benefit corporation headquartered in New York City with $50M+ in capital to develop the core protocols and developer tools for the decentralized computing platform Blockstack. 

YouNow which developed an ethereum-based Props tokens is a US-based live broadcasting service and claims to have 46 million users. Props tokens are integrated with live-streaming YouNow platform to reward users and creators with tokens. 

The companies officials share their opinions on the SEC decision

Muneeb Ali, the co-founder of the Blockstack platform and CEO of the company, while speaking of upcoming token offerings been qualified by the SEC under Regulation A+ stated :

We believe this is a huge step forward for decentralized applications, internet security, and privacy … It is a truly groundbreaking day for decentralized technology.

As per Ali, the company worked with the financial authority over the past 10 months prior to qualifying for Reg A+, under which framework, it began conducting a $28 million cash offering on July 11.

The CEO confirmed that the token offerings sale is open to anyone globally “subject to a small number of geographical restrictions”.

According to the circular filed with the SEC, Blockstack currently offers 40 million of its tokens to non-U.S. citizens in a private placement exempt from the registration requirements under Regulation S. The firm also intends to offer its tokens to residents of the State of New York. 

Younow’s Reg A+ SEC filing for Props tokens states that “A Reg A+ filing would enable the company to bring Props to the entire community of users.” The team elaborated: “This is a landmark moment for our community.” 

About Reg A+ tiers of offerings in a brief 

The US authority’s Reg A+ provides for two tiers of offerings. The first tier allows securities offerings of up to $20 million in a 12-month period while Tier 2 allows up to $50 million within the same time period. Both tiers are subject to basic requirements.

Notable, that Tier 2 issuers have additional rules to follow. The additional requirements include providing audited financial statements, filing annual, semiannual and current event reports, and a limitation on the number of securities non-accredited investors can purchase.

Moreover, issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators. Blockstack and Younow have opted for Tier 2 offerings. 

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