The Path of Cryptocurrency is decided, the Gatekeeper is the SEC & Coins are now a Security
For the first time in United States History, a crypto token offering received formal approval from the SEC. The SEC approved a Regulation A Offering of tokens last week. One Cryptocurrency Token has succeeded where others became embroiled in SEC crosshairs.
Blockstack PBC will begin offering tokens under an exemption available under the 1933 Securities Act.
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You only register an offering if you are offering a security. Blockstack PBC just made its token a security.
THE PATH BLOCKSTACK TOOK
Blockstack labored through the SEC’s approval path for 10 months. After the labor Blockstack qualified for Regulation A. Under Regulation A framework the company was authorized to solicit $28 million of cash investment. The sale is open to anyone globally. There are some restrictions. A small number of geographical restrictions apply but largely the offering remains unrestricted. Prior to obtaining Regulation A qualification only accredited investors could participate. The company had a small 2017 offering. The 2017 offering was conducted under Regulation D.
According to the offering circular filed with the SEC, Blockstack’s current offering is limited to $50 million in Stack tokens each year. The circular details Blockstack offers 40 million tokens to non-U.S. persons. Non-U.S. persons must subscribe through private placement. Non-U.S. Persons that invest must meet exemptions, adhere to certain rules and if complied the securities are exempt from the registration requirements under Regulation S. Regulation D is an offering for securities too.
REGULATION A AND WHAT IS IT?
Regulation A provides two tiers for offerings. Tier 1 allows securities offerings up to $20 million in a twelve-month period. Tier 2 allows up to $50 million within a twelve-month period. For offerings up to $20 million, the issuer has the choice to decide how much they would like to file.
Tier 1 and Tier 2 are subject to requirements. Tier 2 issuers have additional rules to follow. Tier 2 requires things such as audited financial statements, filing annual, semiannual and current event reports. Tier 2 also restricts a limitation on the number of securities non-accredited investors can purchase. Non-Accredited Investors cannot purchase more than 10 percent of either the Non-Accredited Investor’s annual income or net worth (based on whichever is greater). Issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators.
Exemptions under Regulation A are limited to companies organized in the U.S. or Canada. The exemptions are unavailable for companies that already report to the SEC. Certain types of investment companies also are ineligible. Other criteria could disqualify a company. Items that disqualify issuers are not having a specific business plan, past subject to any order of the commission entered within the past five years, or not filing ongoing reports required by the rules during the preceding two years.
WHAT THIS MEANS TO THE COINS YOU HOLD NOW
The precedent of this historic event should not be overlooked. The SEC has thrown down the gauntlet. The significance of this event is overshadowed only by aggressive pursuits the SEC takes on issuers of coins that don’t comply.
A coin offered under an Initial Coin Offering (ICO) without proper securities law exemptions, registrations and filings means your coin issuer has high chance for allegations of fraud, violations with the law, and hosts of other issues.
Liquidate any holding while you are able to. Soon any coin issued out of compliance will be locked up. The cash of the issuer will be drained through excessive legal fees, court fees, fines and settlements with the SEC.
The message is not one of fear but of prudence.
THE FUTURE FOR COIN TECHNOLOGY VALUE & PRICE
The SEC approved a model for coins that use blockchain. This means the arbitrary value is here to stay. Most likely financial statements will play heavy roles in determining a coin’s value. My prediction is that coins will have Net Asset Value (NAV) based on the profit of the issuer. In the most basic sense Net Asset Value (NAV) is the total tangible assets minus total liabilities (secure and unsecured). A premium will be factored for cash flow.
The coin looks to be taking the path as an equity security with its value determined by the financial health of the company.
Could a coin take the path as debt security? Time will tell. Currently, it looks like the coin’s value will be limited by the financial health of the issuer. Stay tuned for continuing developments. Remember, don’t stay in bed with someone who hasn’t taken a shower. They stink. The person trying to lie in your bed without a shower is the ICO that didn’t file with the SEC.
To your knowledge success!
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com