Sunday, July 21, 2019

Blockstack: First Reg A+ Token Offering

On July 10, 2019, the SEC qualified the first digital token Regulation A+ offering.  This is an important event that could open the gates for other Regulation A+ token offerings that have been patiently waiting for their turn.

It was Blockstack that, after a 10-month wait, was approved for the $28 million offering.  According to Blockstack's offering circular, purchasers of the tokens will not be buying anything that resembles securities in a traditional sense.  Instead, they will receive utility tokens usable on the Blockstack network that consists of a Blockchain platform for developers to build applications.  Tokens are being sold to three groups of people: (i) to the existing holders of certain vouchers, at a discount; (ii) to the general public; and (iii) to app developers and reviewers as rewards.   The offering is being conducted directly by the company through its own website,, where qualifying prospective purchasers can sign an online subscription agreement and transfer the money (at least $100) either in US dollars, Ether or Bitcoin. The tokens will not be sold to the residents of Arizona, Nebraska, North Dakota or Texas.  Union Square Ventures, already a 15% equity holder in Blockstack, has indicated interest to purchase $1 million worth of tokens.  Blockstack expects to issue the tokens 30 days after the close of the cash offering, at which time all proceeds raised in the offering will be released from escrow.  Although the tokens will be unrestricted securities under federal securities law, initially, tokens will not trade on any exchange and will be "time locked", which means that purchasers will not be able to use (or "burn") the tokens on the Blockstack platform.  About 1/24th of tokens will be released from the time lock every month.  Concurrently, Blockstack is selling its tokens in Regulation S private offering to non-US investors.  These tokens will be restricted securities. 

It is still uncertain that the Blockstack qualification would, in fact, lead to other Regulation A+ token offerings.  After all, they paid $2 million in legal fees to get the SEC approval, according to the WSJ article and, according to the company's offering circular, their overall expenses related to the offering amounted to $2.8 million.  This is a hefty price tag for a "registered ICO" that others may not afford.

This article is not legal advice and was written for general informational purposes only.  It does not express anyone else's views except for the author's.  If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author Arina Shulga.  

No comments:

Post a Comment