According to The Wall Street Journal, on Wednesday the Securities and Exchange Commission allowed Blockstack, a blockchain startup, to sell digital tokens akin to bitcoin. This offering is the first of its kind. Blockstack plans to start selling tokens to the public on Thursday.
Although the offering seems similar to an IPO, the $28 million offering was approved under Regulation A+ instead, which is usually meant to help companies raise money. In this type of offering, those who buy tokens will not have any ownership stake in the company. Instead, buyers will receive “utility tokens” that can be used as currency through Blockstack’s network.
The offering is a more regulated type of initial coin offering (ICO). ICOs are unregistered sales of digital tokens to the public that gained popularity in 2017 and became extremely lucrative for Crypto companies. Soon after, the SEC said that token sales such as these were in violation of investor-protection laws.
In the first quarter of 2019, ICOs raised $118 million, a huge drop from $6.9 billion a year before. The Blockstack offering could help close the funding gap. Another crypto-based startup, YouNOw Inc., has filed for a Regulation A+ offering as well.
Regulation A+ offerings were originally advertised as a means for startups to tap into capital markets without expensive IPOs. Unfortunately, these offerings have had somewhat poor performance and concerns about fraud.
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