Shearman & Sterling | Fintech 2020 | SEC Approves First Regulated Token Offering under Regulation A+
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  • SEC Approves First Regulated Token Offering under Regulation A+
    On July 10, 2019, Blockstack PBC announced that the Securities and Exchange Commission (SEC) has qualified its offering circular, which would allow Blockstack to conduct an offering under Regulation A for its Stacks (STX) tokens.  This is the first time that the SEC has approved a digital asset token offering under Regulation A.  The offering, which opened on July 11th, is for up to $28 million and will be open to both accredited and non-accredited investors in the United States and globally, subject to certain restrictions.

    Blockstack operates a decentralized computing platform upon which developers can build applications.  Rather than representing a stake in the company, Blockstack said STX will function as utility tokens that will be used on the Blockstack network to register digital assets like domain names, write and enable smart contracts and process transactions fees. 

    Regulation A, which is commonly referred to as Regulation A+ to reflect the expansion of the existing regulation ushered in by the JOBS Act, permits offerings of up to $50 million with reduced disclosure and ongoing reporting requirements as compared to a traditional initial public offering and public company reporting requirements.

    Blockstack Co-Founder and CEO Muneeb Ali in a statement said the company hopes “that this regulatory framework will democratize access to [the Blockstack] network and that other projects may be able to use [this] legal framework as an example.”

    Blockstack is the first, but we do not think it will not be the only firm to turn to Regulation A to facilitate a token offering. In fact, YouNow, a live video streaming company, qualified its offering circular for a token offering shortly after Blockstack.  Going forward, it will be interesting to watch to see how many other firms follow Blockstack’s lead in using Regulation A for its token offering and if this financing path is an effective one for digital asset ventures.