Blockstack Will Raise Capital through the First Ever Regulated Token Offering
The United States SEC has given Blockstack clearance to raise capital under Regulation A+, an alternative method to IPO’s for growing businesses to facilitate a capital raise. The offering will be for $28 million and goes public on July 11, as reported by Wall Street Journal, on July 10, 2019.
Big Win for Crypto Regulation
In their new capital issuance, Blockstack’s investors will not be part owners like a traditional equity model. Instead, investors will be allocated utility tokens that work as a currency over the Blockstack network.
This is a first-of-its-kind issuance to be approved by the American securities regulator and signifies a landmark in crypto development. In essence, this can be considered a regulated version of an ICO where the SEC has vetted a project beforehand to ensure everything is in order.
Blockstack co-founder, Muneeb Ali, revealed that his team spent ten months and over two million dollars to earn the SEC’s approval. While they could’ve gone for an ICO with little to no hitches, this significantly reduces the possibility of the securities regulator bringing down the hammer on them for an unlicensed issuance of securities. Muneeb joked that the two million dollars was well spent and can be considered a donation to the development of the crypto industry.
The existence of a standardized method for young projects to raise capital from both accredited investors and retail investors is a big win for the investment market.
In the past, retail investors could only generate long term wealth through investment products with a significantly lower yield like traditional equity, debt, and commodities.
Now that a regulated method of investing in high yield products exist, investors under the accreditation limit with the expertise and willingness to take the risk can now do so without exposing themselves to scams.
Accredited investor laws have been under fire since the ICO bubble burst at the beginning of 2018. These laws exist for a specific reason; to limit early stage risk to those who can afford to lose the entirety of their invested capital.