Blockstack is the First SEC-Approved Token Offering Under Reg A+

The United States Securities and Exchange Commission (SEC) has granted blockchain-based startup Blockstack clearance to run a $28 million public token offering under Regulation A+, according to an official blog post from Blockstack.

According to news, Blockstack will launch its token offering online on Thursday, July 11th.  It will be open to any purchaser in the U.S. and globally, who would like to take part in the Blockstack next-generation computing network.

Blockstack is a blockchain builder that has raised $47 million through a previous token offering under Regulation D, which is a different provision that does not require SEC approval but is only limited to accredited investors. In comparison, Regulation A+ is open to all companies and individuals and serves as an initial public offering (IPO) alternative for smaller companies to publicly raise money with less strenuous accounting and disclosure standards than a regular IPO requires.

Although previously companies have taken advantage of Regulation A+ funding, this marks the first time that investors will receive a token, rather than shares in the company. This development has the potential to be a game-changer for other crypto startups that are looking to sell tokens but not equity in their companies whilst also remaining SEC-compliant.

Blockstack founder Muneeb Ali has shared his enthusiasm, however stated that the process has very long and costly since the SEC had to devise a brand new protocol for token offerings under Reg A+, something the regulator had never done before.

Accordingly, the startup has spent 10 months and approx. $2 million to gain approval from the SEC. Ali apparently said that Blockstack had to develop a protocol for running what is essentially a regulated ICO through Regulation A+ from the ground up.

This is possibly a precedent-setting moment for the crypto space, according to reports. Initial coin offerings (ICOs) have lost much of their appeal ever since they became the target of an SEC crackdown. According to WSJ data, ICOs attracted less than $120 million to their coffers in Q1 2019 in comparison nearly $7 billion in the year-ago period.

Meanwhile, recent poor performances and fraud concerns surrounding some of the Reg A+ IPOs have discouraged Nasdaq and the New York Stock Exchange from Reg A+ listings. Against this backdrop, having the SEC’s approval on a Reg A+ token offering may shed light on a new path for blockchain companies to raise funds under regulation, according to the startup.

Now that Blockstack has successfully created this new path for blockchain companies to raise funds, certainly more companies will now be encouraged to seek SEC approval for their token offerings rather than argue with the regulator that their tokens are not securities.

Blockstack Files with SEC for Its Token Sale

Blockstack, a blockchain-based applications platform launched in 2017, has announced its intent to raise $50 million in a token sale, by filing with the SEC for Regulation A+ crowdfunding exemption.

First Token Sale Filed with the SEC

The token sale, would be operated via a wholly-owned subsidiary, the “Blockstack Token LLC,” and entail the sale of 295 million Stacks (STX) tokens.

If approved, this could be the first token offering that has been registered with SEC. While the move still requires regulatory review, the sale would enable Blockstack to raise capital through the U.S. securities markets.

The Regulation A+ exemption enables equity crowd funding campaigns to offer and sell securities to U.S. investors via two tiers, either for $20 million or $50 million, each over a 12-month period.

The total amount of tokens being offered stands at 295 million. According to the SEC filing, Blockstack will be offering 215 million tokens at $0.12 to its early backers. Another 40 million tokens will be made available at $0.30 each. The final 40 million tokens will be reserved for incentivizing developers building applications on the platform.

Some of the investors that will be participating in the sale include Hardvard’s endowment fund, Lux Capital, Foundation Capital along with other individual investors.

 “The net proceeds of the offering will be used to accelerate the development of its decentralized computing stack and app ecosystem,” the company said in a release.

Previous Token Sale

The company has already raised $52 million in December 2017 by selling 440 million tokens at the time. Investors included Union Square Ventures, Foundation Capital, Winklevoss Capital and Blockchain Capital, among others.

Muneeb Ali, co-founder and CEO of Blockstack, believes this could help the cryptocurrency industry establish a proper framework for both investors and other blockchain startups.

“We’ve been working with securities lawyers to create a legal framework that can enable blockchain protocols to comply with SEC regulations.”

 “This can potentially set a precedent for others in the industry, not just for public offerings, but also as a path to launch new public blockchains and establish a path to bootstrapping decentralized ecosystems.”

According to the filing, Blockstack now employs 21 employees and has $32 million in total assets. The company has launched its native blockchain, the Stacks protocol, and has seen more than 80 decentralized applications built on its platform.