By
Steve Muchoki
April 19th, 2024
SEC, for the first time ever, approved a $28 million Reg A+ offering for decentralized Internet company Blockstack. The company will begin selling the SEC-approved tokens, essentially an investment vehicle for fundraising, as of today.
The Securities and Exchange Commission cleared blockchain startup Blockstack to sell Bitcoin-like digital tokens, a first-of-its-kind offering that could give young cryptocurrency businesses a new fundraising template. The blockchain-based startup got its go-ahead to run a $28 million public token offering under Regulation A+.
This means that this initial public offering is alternatively geared towards startups in need of early funding. Regulation A+ funding was introduced in 2012 via the “Jumpstart Our Business Startups Act.” Per the report, any member of the public can partake in a Regulation A+ funding round.
While Regulation A+ has more tolerant announcement obligations than as with an IPO, it has two tiers with hard caps on raised funds, maxing out at $50 million within a 12-month period.
Founders Muneeb Ali and Ryan Shea admitted spending $2 million to get approval for the sale. Ali also added that it took them so long and cost so much because the company and the SEC had to start from scratch to create a protocol for a digital-token offering under Reg A+.
BREAKING: Blockstack received SEC qualification; first-ever SEC-qualified token offering in US history. https://t.co/IbbodLCLgS
— muneeb.btc (@muneeb) July 10, 2019
Ali said:
“It is a truly groundbreaking day for decentralized technology and, by extension, digital rights. No company on the internet should have so much power that it can debate if it should treat users in the right way or not. By building technology that can’t be evil, trusting centralized organizations to make the right choice is replaced by mathematical proofs.”
Bare in mind that this is the first approval the SEC gave for a token offering, after a series of crackdowns the regulator led against unregistered ICOs it deems as securities (let’s just remind you of SEC’s dispute with messaging app Kik over its $100 million ICO).
The truth is, recent not-so-good performances and fraud concerns surrounding some of the Reg A+ IPOs have discouraged companies as Nasdaq and the New York Stock Exchange from Reg A+ listings. According to Blockctack, having the SEC’s approval on a Reg A+ token offering, may some light on a new path for blockchain companies to raise funds under regulation.
The news quickly came to Twitter community. One of the most prominent traders and analysts Anthony Pompliano said that “finally non-accredited investors can participate in investments that previously were only open to the rich.” He tweeted:
HERE WE GO!
@blockstack was just approved by the SEC to hold the first regulated token offering under Reg A+.
Finally non-accredited investors can participate in investments that previously were only open to the rich.
The laws need to change, but this is next best thing 🙏🏽
— Pomp 🌪 (@APompliano) July 10, 2019
Jake Chervinsky, who serves as Defense Counsel in U.S. government criminal investigation’s at Kobre & Kim tweeted:
🚨 Huge news: the SEC has approved @blockstack's Reg A+ application to issue STX tokens in a public securities offering.
This is the *first ever* SEC-approved token issuance & a huge step for the crypto industry. Congrats to @muneeb & team — thanks for blazing the path forward!
— Jake Chervinsky (@jchervinsky) July 10, 2019
Blockstack previously had raised $47 million through a previous token offering under Reg D, a different provision that does not require SEC approval but is only limited to accredited investors. Reg A+ is, however, open to all companies and individuals, adding its value as the financing accelerators for smaller firms.
62 million of Blockstack’s tokens, dubbed Stacks, will be sold at a price of $0.3, while 78,333,333 Stacks Tokens will be offered at a discounted price of $0.12. Additional $12 million in tokens will be allocated to reward the developers who create the top-ranked applications within the Blockstack ecosystem.
We salute this SEC’s decision and hope that this will create new path for blockchain companies to raise capital and that more companies will be encouraged to seek SEC approval for their token offerings.