Reg A+ Issuer Blockstack Has STX Token Listed on Binance and HashKey Pro

New York-based Blockstack, a decentralized computing network where users control their data and login information, announced that its Stacks (STX) token has been listed on digital asset exchanges Binance and HashKey Pro. Hashkey Pro is a Hong Kong based digital asset exchange for institutional investors.

Ben El-Baz, CSO at HashKey Pro stated:

“We chose to list Blockstack’s STX token because HashKey shares a vision with Blockstack that regulatory compliance is a positive development for the crypto economy and digital asset markets, and we believe that better information disclosure can help users better understand the assets they trade.”

Blockstack is the token issuer which was the first to see a Reg A+ offering qualified by the US Securities and Exchange Commission (SEC).

Blockstack’s developers said that they’re planning to expand investors’ access to STX, particularly in Asia, where HashKey Pro’s offices are based and Binance is well-known for its crypto trading services. Blockstack CEO Muneeb Ali says Asia is a “priority region.” 

In statements shared with Coindesk, Ali noted:

“It’s very important that we have a global network of users and investors.”

The STX token is used to register cryptocurrencies on Blockstack’s blockchain network. STX tokens are used when users complete the registration process or when resources are utilized  on the Blockstack network, somewhat like how Ether is consumed when using the Ethereum blockchain.

Founded in 2013, the firm raised $23 million prior to its listing. Asian investors contributed $7.6 million to the total funding amount, while the remaining came from Blockstack’s Securities and Exchange Commission-approved July 2019 offering.

Ali stated that 4,500 different investors took part in Blockstack’s US-based funding round.

However, the company’s regulated offering has meant increased scrutiny, as limits were set on how Blockstack’s management can interact with American investors. There are restrictions placed on buying the STX tokens that power Blockstack’s decentralized applications (dApps), Ali confirmed.

The US Securities and Exchange Commission (SEC) released documents on October 24,  stating that US persons may not purchase, sell or trade STX tokens on Binance or HashKey Pro.

Complying with regulatory guidelines and maintaining transparency are Blockstack’s main priorities, the firm’s representative said.

Blockstack’s management says it will release internal documents and will provide the wallet addresses of its early token backers, so that everyone will know “when any early backer moves their Stacks tokens.”

Ali noted that his crypto wallet address would also be shared publicly. He said he’s made a long-term commitment to the project, but acknowledged that not everyone will hold their STX for an extended period of time. 

Ali remarked:

“If any of the early backers exit, I think people should know.”

Blockstack Reports $23 Million Raised in First Reg A+ Token Offering

Blockstack, the first token issuer to have a Form 1-A approved by the Securities and Exchange Commission (SEC) has raised $23 million in their offering which included funds raised under Reg S for international investors. The final tally was revealed by Blockstack in a blog post. Blockstack used the Reg A+ exemption to issue tokens they preferred not to label as securities although by using the exemption it was hard to argue otherwise. Back in July, securities attorney Doug Ellenoff told Crowdfund Insider:

“…until there is some court or legislative clarification, we should just move on and accept that tokens used in the first instance to raise funds for entrepreneurial endeavors are securities.”

Under Reg A+, an issuer may raise up to $50 million from both accredited and non-accredited investors. Uniquely, after a Reg A+ offering is closed the assets may trade on an exchange – an important characteristic to create liquidity for holders.

Blockstack worked closed with the SEC to have its Reg A+ offering “qualified” thus kicking off the first digital asset offering for an exemption that has been viewed by the token sector as a prime vehicle to raise capital in a regulatory compliant offering.

Blockstack that for the first time retail investors had been able to participate in a token offering. In the past, most issuers utilized the popular Reg D exemption which is available only to accredited investors. Blockstack reported that over 4500 individuals and entities participated in the offering – including a Reg S offering for investors outside the US. Blockstack pointed to the fact that  Reg A+ investors were able to participate at the same price as an earlier Reg D round.

Institutional investors included Union Square Ventures, Lux Capital, Recruit Holdings, Arrington Capital, Hashkey Group, Fenbushi Capital, Frontier Ventures, Spartan Group, and other funds, according to Blockstack. The company also reported “strategic investors” from Asia.

“We announced earlier that Hashkey and SNZ led our Asia strategic round. Recruit, one of the largest internet companies in Japan, partnered for the Japanese market. And we are in discussions with international investors for an additional $5M+ which may be distributed in a separate private placement or in a follow-on SEC-qualified offering, as we have previously disclosed in our SEC filings. The goal of this additional distribution is to continue growing our community and network in Asia,” reported the company.

The company said they will start distributing Stacks Tokens (STX) to developers who are building dApps on the network. Reportedly already over 250 have already been built in the past 6 months.

Blockstack is expected to use the funds to fuel platform growth and boost its computing network.

In the end, it will be the execution of Blockstack’s stated business vision that will determine whether or not the offering is a true success – regardless of whether or not the asset is a digital token.

Tokens expect to be traded on non-US exchanges as soon as next month.

Attorney Doug Ellenoff Comments on Blockstack Reg A+ Offering: “Chameleon Tokens – sometimes they are securities and sometimes they are arguably not”

Blockstack has kicked off the first qualified Reg A+ token offering. Blockstack has reportedly worked closely with the Securities and Exchange Commission (SEC) to get the offering approved. Multiple issuers have been attempting to use the JOBS Act exemption to facilitate security token offerings due to the fact that both accredited and non-accredited investors may participate while raising up to $50 million. That and the fact that offerings may soon trade on a marketplace at the end of an offering (if the issuer decides so).

Blockstack is a “decentralized computing network and app ecosystem.” The ecosystem is one that “protects your digital rights.” The developer community is said to be around 7,500 members and, so far 170+ apps have been built on the Blockstack platform.

The Stacks token offering started on July 11, 2019, and is expected to continue for 60 calendar days until September 9, 2019. The Stacks tokens are being offered to the general public at $0.30 per token. Voucher holders may purchase tokes for less – $0.12 per token. The Stacks token wants to be a utility token for the Blockstack platform that is using a securities exemption to be compliant. Kind of a regulatory compliant initial coin offering.

Not too long ago, Crowdfund Insider received several emails from Blockstack representatives telling us not to call it a security token which seemed a bit at odds with reality as it is being issued under the Reg A+ securities exemption.

Blockstack Clears a Regulatory Path

Regardless of what you want to call it, the Blockstack offering has helped to clear a path for other token issuers to adhere to US law and offer utility type digital assets in a compliant manner.

To gain further insight into the Blockstack offering, CI spoke to Doug Ellenoff, managing partner of Ellenoff, Grossman & Schole. Ellenoff has long been engaged with the alternative finance industry and is a regular visitor in the halls of the SEC. He spent the time to read through the Blockstack Offering Circular outlining the token project.

Ellenoff said that the argument that the tokens weren’t/aren’t securities under Howey and the “investment contract” theory is specifically addressed in the Blockstack Form 1-A, and the question has been put to rest as no longer really debatable.

“Tokens wouldn’t be eligible for inclusion on this SEC form if they weren’t deemed to be a security, since this form is specifically for securities under the jurisdiction of an agency specifically authorized to regulate same,” said Ellenoff. “So while certain members of the token industry may continue to privately argue the merits of the SEC position until there is some court or legislative clarification, we should just move on and accept that tokens used in the first instance to raise funds for entrepreneurial endeavors are securities.”

Blockstack faced this very practical concern on its Form 1-A filing in figuring out how to even properly refer to the tokens being issued, said Ellenoff.  The Stacks token is not an offering of equity ownership.  Ellenoff believes that consideration should be given by the SEC Staff to amending the form to specifically address this issue in recognition that digital assets are in fact different from traditional securities.

To be a Security, or Not to Be…

Ellenoff explained that while there is some concession by Blockstack about the status of a token, there is certainly not capitulation on many areas of token doctrine, particularly as it relates to the post-issuance stage whereby a holder may actually use the token for consumptive purposes.

“In this regard, you can call the company’s token instruments, Chameleon Tokens- sometimes they are securities and sometimes they are arguably not,” Ellenoff said.  “So we have established that a token is initially a security (at least until the law changes through potential future court intervention or legislative action) but you still have no ownership interest in the registrant- not in any traditional sense.  The investor is actually receiving the right to “use” the token for consumptive purposes on the registrant’s platform or possibly trade it sometime in the future.”

Of course, it was the trading part that made the ICO industry so red hot. ICOs were, in fact, a non-regulated speculative free for all. Stacks tokens are different.

In the next post-original issuance stage, Blockstack seems to argue that the token morphs from being a security to a utility token said Ellenoff. He added that he agrees that this argument has merit and is similar to a pre-order campaign that subjects the purchaser to equity-like risk.

This forms the basis of similar regulatory logic for platforms using tokens to fund themselves according to Ellenoff.

“It’s argued that the token would be a security in the first instance because the network hasn’t been built, and consequently, the investors are very much at risk of the full loss of their investment.  For this reason, the SEC has concerns that investor should have access to full disclosure about the investment and its associated risks.  The argument from early on in the token industry has been that the token isn’t a security at this point in time because it has consumptive value, like any pre-order of goods/services, and therefore, the token shouldn’t be deemed a security.”

Ellenoff, while not being a part of the Blockstack offerings discussions, believes one can see the tension between the parties positions, decided by hard-fought negotiations and compromise.

“My suspicion is that the SEC heard the registrant’s argument and countered with the reality that historically very few token holders actually ever do use the services of the issuing platform and that their considered view would be that the tokens were actually purchased by the investor (and in reality sold and marketed on the basis that the tokens would appreciate and investors could realize gain in the future by reselling them in the aftermarket). While this truth was known in all likelihood by the registrants, it is doubtful that they would fully concede the point and vigorously maintained that once the platform of the registrant was built, that holders of tokens would in fact want to redeem them for useful services.  And here is where we learn of an intriguing resolution.  Regulation through negotiation.”

Ellenoff said the accommodation and the path forward would seem to be that the tokens may not immediately be available for free transferability – a so-called time lock.  He said the details in the Form 1-A should be reviewed to appreciate the novelty of this approach.

“As best as I can read between the lines, the SEC wanted comfort that the platform has time to be engineered to completion and for the holders of the tokens to have enough time to actually use the tokens for the available services.  This is actually the basis for some of the same rationale in the old SAFTs [Simple Agreements for Future Tokens].  In the instant case, the time lock is close to two years with some accommodation for dribbling out a small 1/24 interest of a holders position into the public market for secondary transactions.”

The practical result is that the SEC has secured a construct whereby the holders may not have easy access to pump and dump their positions.

Presuming that the platform is operational in the future and a purchaser has elected not to use its position for platform services, the token would seem to reacquire its securities like properties, and by acknowledgment in the offering circular, may only then be sold through a licensed broker-dealer or licensed alternative trading systems.

This is a very significant concession, Ellenoff explained, because the token holder now has to follow the resale processes as would any other securities, through regulated channels that are subject to traditional orderly market rules.

“Purchasers will need to open accounts and be subject to suitability analysis, know your customer rules, anti-money laundering, and illegal markups.  This acknowledgment is a nod by the authorities to the reality of investors purchasing these tokens, but never actually using them.  So now, except where a purchaser actual invests and uses the token on the registrant’s platform, all other activity will be treated as a security and be the subject of all securities rules and regulations.”

Ellenoff has been involved in several novel programs in the past such as SPACs [Special Purpose Acquisition Companies], securities crowdfunding, and PIPEs [Private Investment in Private Equity]. He said it is not an ideological battle between commercial parties and regulators but a practical negotiation.

“So while I can quibble about the intellectual expedience of certain aspects of what I have read, I must also credit the parties involved in seeking a practical construct to a thorny set of securities law issues,” added Ellenoff. “They have facilitated a resolution of diametrically opposed philosophies in a productive manner, achieving a well-considered balance between the need for proper investor disclosure and capital formation for entrepreneurs.”

Ellenoff cautioned that this is by no means the end of the debate as many questions remain unanswered.

“How do the States and Foreign authorities weigh in on this debate for both the original issuance and the secondary trade-ability?” asked Ellenoff.

His biggest concern is that despite a herculean effort by Blockstack and its professional advisors, token holders don’t actually want fundamental investment risk. Perhaps, if they can’t trade/sell, they won’t invest at all.

Blockstack becomes First Reg A+ Token Offering Qualified by the SEC

Blockstack has become the first token issuer to have a Reg A+ offering qualified by the Securities and Exchange Commission (SEC). The event may break open a longstanding logjam of digital asset filings which have been in limbo at the SEC.

In a blog post, Muneeb Ali, co-founder Blockstack and CEO of Blockstack PBC, stated:

“We are honored to announce that Blockstack PBC’s upcoming token offering has been qualified by the SEC under Regulation A+. This is the first time in U.S. history that a crypto token offering has received SEC qualification. We believe this is a huge step forward for decentralized applications, internet security, and privacy.”

In the past couple of days, Blockstack had refined the Offering Circular submitted to the SEC with the final version posting this week.

Issuers may raise up to $50 million under Reg A+. Additionally, issuers may raise capital from both accredited and non-accredited investors. Most token issuers have been using Reg D in the past – a securities exemption that is available only to accredited investors. Another unique aspect of Reg A+ is the fact the digital asset may become immediately tradable.

It has been widely expected for some time that Blockstack would become the first digital asset Reg A+ issuer. The fact the company is using CoinList to issue the token and PrimeTrust to provide custody were certainly positive factors in the eyes of the SEC.

Ali said they decided to work directly with the regulators to figure out a legal framework for the token offering. Ali explained that they wanted to make the digital asset available to the general public and not exclude US investors – currently a common occurrence.

“We believe that this was the harder but better path to take. We hope that this regulatory framework will democratize access to our network and that other projects may potentially be able to use our legal framework as an example. We believe that this qualification not only benefits the Blockstack ecosystem but can help mature the broader crypto industry,” said Ali.

Blockstack said it will conduct a $28 million cash offering beginning Thursday, July 11th at 11:00 am ET. As part of the offering, an additional $12 million in tokens will be allocated to Blockstack’s App Mining Program, which rewards the developers who create the top-ranked applications within the Blockstack ecosystem.

Another interesting aspect of the offering is the fact that the token is being issued as a security but the company would like to see the token morph into a utility – something the SEC has indicated it is comfortable with – contingent upon the characteristics of the digital asset.

The additional capital raised by the offering will provide the funds to power the Blockstack decentralized computing network.

There are also incentives for developers to contribute to the success of a secure next-generation computing network. The Stacks tokens (STX), will be used to register digital assets.

Investors are able to register now to participate in the offering. The sale is on a first-come, first-serve basis, as measured by receipt of payment. Larger investors ($200k and up) should contact Blockstack directly.

It will be interesting to see which companies, and how soon, follow in the footsteps of Blockstack and leverage Reg A+ to launch a digital asset offering.

 

Ready to Go: Blockstack Updates Reg A+ Filing, Offering said to Commence Within 2 Days of SEC Qualification

Blockstack, the token issuer that has been widely predicted to be the first Reg A+ offering to be approved by the Securities and Exchange Commission (SEC), has updated its Offering Circular filed with the Commission. CoinList is running the back end on the offering for the decentralized network and App ecosystem, so the operational side should be good to go.

The document is extensive so it is difficult to pinpoint what has changed but one area of difference is the structure of the offering.

In the May filing, the Blockstack Offering Circular was seeking up to $50 million (the max amount under Reg A+). Blockstack said it was offering up to 295 million tokens of their “new cryptoasset, the Stacks Token. “

Blockstack posted that up to 215 million Stacks Tokens at a price of $0.12 to current holders of certain non-binding vouchers to purchase Stacks Tokens. 40 million tokens at a price of $0.30. And up to 40 million Stacks Tokens for non-cash consideration pursuant to their “App Mining” program.

Filed yesterday, the Blockstack Offering Circular now indicates that the company will seek $40 million or up to up to 180,333,333 tokens of the Stacks Token.

Concurrently Blockstack is offering up to 40,000,000 Stacks Tokens to non-U.S. persons in a private placement offer under Regulation S. Previously this was pegged to a range of between 40 and 80 million.

Blockstack continues to test the waters, a feature of Reg A+, and is accepting registrants for the offering.

Both filings indicate a readiness to move forward with the offering as soon as the offering is qualified by the SEC. The Offering Circulars state:

“The offering will commence within two calendar days after the offering statement in which this offering circular is included has been qualified by the SEC.  The offering under the voucher program and the general offering will continue for, at most, 60 calendar days following the commencement of this offering; we may also terminate the cash offering at an earlier time if the general offering has been fully subscribed and the voucher program is either fully subscribed or we have determined, in our discretion, that no additional voucher holders are expected to subscribe to the offering.”

So will Blockstack be the one blockchain based offering to break the Reg A+ logjam that has been building at the SEC while the regulators figure out how to manage digital assets under Reg A+? Who knows. But whether Blockstack or another issuer is first, the SEC needs to push forward with regulatory compliant offerings – just like Germany recently accomplished.

Blockstack Commences “Testing the Waters” for Possible Security Token Issuance Under Reg A+

In an email distributed yesterday (May 31), Blockstack announced the commencement of “Testing the Waters” for a potential security token offering (STO) under the Reg A+ security exemption. Last month Blockstack Token LLC filed a Form 1-A and offering circular with the Securities and Exchange Commission (SEC) to raise up to $50 million in the STO for “Deferred Delivery Agreement for Stacks Tokens.”. The offering circular was updated earlier this month.

In the email, Blockstack stated:

“Although the SEC has not yet qualified the offering statement, we are pleased to open pre-registration as a part of the “testing-the-waters” phase of our planned sale of Stacks tokens. Pre-registering now helps us gauge interest and also verifies your identity, making it easy to complete your purchase if and when the sale is qualified.”

Being able to gauge investor interest in a security offering prior to actually selling the security is one of the characteristics of the Reg A+ exemption. Blockstack is using the Coinlist service to facilitate the STO.

Blockstack noted that completion of pre-registration does not complete the purchase of Stacks tokens, and you are not obligated to purchase the amount of Stacks tokens you indicate during your pre-registration, or any Stacks tokens at all.

To date, not a single Reg A+ STO has been qualified by the SEC. Yesterday, the SEC Director of Corporate Finance, Bill Hinman, commented on the qualification process stating it has been a “deliberative process” yet they hope to see some of these issuers succeed.

Many crypto industry insiders have pegged Blockstack to become the first Reg A+ STO offering to be approved by the SEC.

Blockstack has captured the support of some high profile investors including the Harvard University Endowment Fund.

Reg A+ benefits from the fact that both accredited and non-accredited investors may participate in the offering and the security may become tradable immediately.

Blockstack Files Updated Reg A+, Will this be the One to Get Qualified by the SEC?

Blockstack has filed an updated Form 1-A to utilize Reg A+ to raise up to $50 million in a tokenized security offering. Blockstack will be issuing “Deferred Delivery Agreement for Stacks Tokens.”

According to the Blockstack Offering Circular:

Blockstack, is offering up to 295 million tokens of their cryptoasset the “Stacks Token.”

The company will be offering the digital asset in the following methods:

  • [Blockstack is] offering up to 215 million Stacks Tokens at a discounted purchase price of $0.12 to current holders of certain non-binding vouchers to purchase Stacks Tokens, up to a maximum of $3,000 in Stacks Tokens to each voucher-holder (the “voucher program”).
  • [Blockstack is] offering at least 40 million Stacks Tokens at a price of $0.30 per token to “qualified purchasers” generally (as such term is defined under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”)) (the “general offering,” and together with the voucher program, the “cash offering”).  Blockstack may, in its discretion, increase the size of the general offering (up to a maximum of 62 million tokens).
  • [Blockstack is] offering up to 40 million Stacks Tokens for non-cash consideration pursuant to our “App Mining” program (the “App Mining program”) in exchange for the development of well-reviewed applications on the decentralized application network created by Blockstack (the “Blockstack network”), as well as for the review of those applications.

In total, Blockstack hopes to raise the Reg A+ maximum amount of $50 million.

Within the crypto community, Blockstack is being viewed as the most likely first digital asset issuer to be qualified by the Securities and Exchange Commission. While many issuers have attempted to receive approval by the SEC for a tokenized offering via Reg A+, to date, none have received a stamp of approval from the regulator.

Chatter within the industry indicates that questions from various stakeholders at the SEC have diminished in recent weeks indicating the qualification odyssey is nearing an end.

The well-funded Blockstack has spent up to $2 million on the qualification process.

Last month, it was reported that Harvard’s endowment fund had backed the blockchain based company.

If Blockstack is approved, it will be a seminal event for the entire security token industry. Reg A+ is widely viewed as a good path to providing non-accredited investor access to private securities as well as near term liquidity as issuers may allow any issued securities to trade on a public marketplace.

Harvard’s Endowment Fund Invests in Blockstack Tokens, Supports Company as Part of Token Advisory Board

Harvard University, via their endowment fund, is backing Blockstack’s security token offering.

Digging into the Reg A+ Offering Circular filed with the SEC last week, Blockstack highlighted the relationship with Harvard Management Company:

“In connection with the sale to the QP Fund, we have formed a token advisory board, the LP Advisory Committee, the main purpose of which is to determine whether the above milestones have been met.  The token advisory board consists of seven members. Three of the members, Charlie Saravia, Zavain Dar and Rodolfo Gonzalez are designees of affiliates of the Harvard Management Company, Lux Capital and Foundation Capital, respectively, limited partners of the QP Fund which have purchased an aggregate of 95,833,333 Stacks Tokens; the board also consists of four independent members, Koen Langendoen, Arvind Narayanan, Arianna Simpson and Catherine Tucker.”

Harvard Goes Crypto

Saravia is a Managing Director of Harvard Management Company.

The 95.8 million tokens represent an $11+ million investment but perhaps, more importantly, the Blockstack offering now gains with the affiliated prestige of Harvard’s backing and Ivy League stamp of approval.

Crowdfund Insider reported last week, when the Form 1-A hit the SEC website, that Blockstack expects their Reg A+ offering to be qualified by the SEC as they have been working with lawyers to assure their protocols comply with SEC regulations:

“Our framework is consistent with the latest SEC guidelines released last week.”

To date, not a single Reg A+ filing that is affiliated with a blockchain/crypto offering has been approved by the SEC.

Reg A+ is an updated securities exemption and one of three crowdfunding rules approved under the JOBS Act of 2012. The exemption has been described as a “mini-IPO” type facility. Issuers must complete a comprehensive document explaining their business and associated risks. The document goes through a lengthy review process by the SEC. If approved, a Reg A+ issuer may raise up to $50 million in securities.

According to the Offering Circular, investors may participate in the “Stack Token” offering via either fiat currency, Bitcoin, or Ether.

Investors in a Reg A+ offering may be accredited or non-accredited. Importantly, securities issued under Reg A+ are immediately transferable or tradable – something the crypto industry is extremely interested in as it may provide an easier path to better liquidity.

The Harvard Management Company is the largest university-affiliated endowment fund in the world. The Fund’s 2018 report said the value of its holdings stood at approximately $39.2 billion. Over $1.8 billion was distributed to Harvard’s operating budget during the fiscal year and the endowment rose by 10% during the same period.

The “Stack Token” is currently soliciting interest from investors also called “testing the waters” under the Reg A+ exemption.

The project by Blockstack will provide a “fast, scalable distributed ledger for identity, storage, and transactions in the Blockstack ecosystem.”

Stack Token projects currently include decentralized storage, App mining, an SDK and a fund to support decentralized Apps (DApps).

Blockstack has previously raised capital from outside investors. A SAFT offering in 2018, under Reg D, raised $21.2 million from 683 investors.

Blockstack Files Form 1-A to Issue Stack Tokens Under Reg A+ : “Our framework is consistent with the latest SEC guidelines”

Blockstack is the most recent blockchain based company to file for a Reg A+ securities offering to issue a security token. An offering circular filed with the Securities and Exchange Commission (SEC) explains in explicit detail the objective of the Blockstack tokens to be issued under the name “Stack Tokens.” Blockstack has previously raised capital under Reg D including a SAFT in 2018 that raised $21.2 million from 683 investors.

Blockstack describes itself in the offering circular as follows:

“We are a technology company that together with our corporate parent, Blockstack PBC, is developing, sponsoring and commercializing an open-source peer-to-peer network using blockchain technologies to ultimately build a new network for decentralized applications, which we refer to in this offering circular as the “Blockstack network.”  The Blockstack network can be accessed using our open-source Blockstack Browser available at blockstack.org.  Examples of decentralized applications that have already been built and are being used on the Blockstack network include: Graphite, a decentralized alternative to Google Docs, Sigle, a decentralized and open-source blogging application and BitPatron, a subscription content service for creatives. The ultimate goal in creating the Blockstack network is to enable application developers to build and publish decentralized applications without the need to maintain central databases, and for users of these decentralized applications to retain control over their own data.  Over 105,000 user accounts have been registered on the Blockstack network and over 7,000 enthusiasts and developers currently participate in our open-source community (including through our Slack group and online forum).”

The Stack Token website provides additional information regarding the security token.

In an email, Blockstack said their offering was compliant under recent SEC guidance:

“We’ve been in a confidential submission process with the SEC, making progress as we drive towards an SEC-qualified token offering. Recently, U.S. markets have been closed to crypto projects given regulatory uncertainty, and we believe in opening the U.S. markets to innovation in this area. We’ve been working with securities lawyers to create a legal framework that can enable blockchain protocols to comply with SEC regulations. Our framework is consistent with the latest SEC guidelines released last week.”

Blockstack seeks a maximum raise of $50 million – the most an issuer can raise under Reg A+.

Concurrently, Blockstack intends to sell between 40 and 80 million Stacks Tokens to non-U.S. persons in a private placement under Reg S. The tokens sold in the Reg S offering will be restricted securities and will be sold for delayed delivery and subject to a transfer restriction for one year after sale.

The price of the Stack Tokens is tiered based on several different factors pertaining to the security offering.

Investors may participate either with US dollars, Bitcoin or Ether.

The Stacks Tokens should be tradable at some point following release from any lock-up on a “registered exchange or alternative trading system for purposes of federal securities laws.”

There have been many aspiring issuers seeking to issue security tokens under Reg A+. To date, the SEC has yet to qualify any of these offerings leading to some issuers to completely remove any mention of blockchain, crypto, tokens, etc. in their filings. Some issuers expect to convert to digital assets at some point in the future.

Blockstack Token Fund Raises $26.2 Million

According to a filing with the Securities and Exchange Commission (SEC) Blockstack Token Fund has raised $26,248,475 in a Reg D 506c offering. The money raised was separated into two different vehicles: Blockstack Token Fund QP, LP raised $17,783,394.88 and Blockstack Token Fund AI, LP raised $8,465,080.20. According to the document, 176 investors backed the funds.

Blockstack was founded by Muneeb Ali and Ryan Shea in 2013. A public benefit corporation, Blockstack is described as follows:

“Blockstack is a new internet for decentralized apps that you access through the Blockstack Browser. With Blockstack, there is a new world of apps that let you own your data and maintain your privacy, security, and freedom.”

Ali received his Ph.D. in Computer Science from Princeton University where he specialized in distributed systems.

According to the Blockstack site, the company currently has over 74,000 domains registered. Many Blockstack apps are said to be in production – all of which are expected to be available via a single account. App developers can earn payouts if they build a popular app. while users control their own data as intermediaries are excluded from the equation.

The Fund is aimed at growing an “ecosystem of decentralized applications on Blockstack.”

In a recent blog post, the founders explained their new network and vision for the ecosystem:

We’ve thought hard about corporate structures before, such as in 2017 when we raised ~$50M as part of our token offering we decided to start a new practice for token sales—we self-imposed milestones on the project for investor protection, where the investors could receive a refund of up to 80% of their investment if we do not build the technology and successfully deploy it. The legal framework we used was not straight-forward, but it gave us the properties (compliance with applicable law, investor protections, etc.) that we were looking for. We’re determined to forge new paths and put in place governance structures that accomplish the goal of a robust and decentralized ecosystem. This won’t happen in one fell swoop, but rather over time, through careful consideration and execution.”

Supercharged Crowdfunding: CoinList Plans Future of One Stop Funding with Compliant ICOs


CoinList, a marriage between AngelList and Protocol Labs, has big plans for the future of early stage funding using digital tokens. Following the blowout success of Filecoin, an Initial Coin Offering (ICO) that saw an astounding $200+ million raised, CoinList quickly regrouped and revamped its platform to prepare for more ICOs. Today, the second ICO has been launched on CoinList as BlockList is seeking $44 million – an amount that seems trivial in contrast to the funding raised for the inaugural offer.

Think about the story of AngelList for a minute. AngelList rocked the private funding world in 2013 with its No Action letter from the SEC before anyone in the US really new what the term crowdfunding meant. Since that day four years ago, AngelList has helped early stage companies raise over $600 million.

For CoinList’s inaugural ICO, Filecoin – a yet to be launched marketplace for distributed digital storage (think AWS distributed across personal computers), raised $205.8 million in just a matter of weeks. According to CoinList, $135 million was raised in the first hour alone. Now that’s incredible. What took years to accomplish at AngelList took a fraction of the time at CoinList. Sure, there is a element of hype surrounding the ICO market that engenders a certain amount of “exuberance,” but AngelList has been smart about their approach. The team visited with regulators prior to launch and every single offer will be filing the necessary exemptions so each tokenized crowdsale expects to be fully compliant.

Recently, Crowdfund Insider had the chance to sit in on a presentation by CoinList regarding their vision for the future of crypto offerings and what investors may expect. The presentation was a sobering commentary on ICOs as the the speaker bluntly stated investing in an ICO will probably be the riskiest investment you will ever undertake. But if you dare venture down the cryptocurrency path you may have the opportunity to join into some seriously disruptive tech.

ICOs allow companies to raise funding and create potential customers in a single round. Investors purchase tokens because they believe in the concept the company is creating but they may also be speculating the crypto will go up in value over time. Tokens may take many different forms and can be similar to a debt or equity securities or simply be utilized for a specific service. With over $3 billion raised in ICOs to date, and dozens of offerings launching everyday, the concept has clearly caught the eye of early stage companies in need of growth capital.

[clickToTweet tweet=”ICOs allow companies to raise funding and create potential customers in a single round” quote=”ICOs allow companies to raise funding and create potential customers in a single round”]

But for every legitimate ICO there are a handful (or probably a lot more) that are either bogus or destined to fail before they launch. While some crowdsales are utter BS, it can be hard to tell which token may have a chance of commercial success. No one wants to fall prey to a get-rich-quick scheme at your own expense. CoinList believes in a more balanced approach advising investors to only participate in offers where the team is known, they clearly have the necessary skills to pull off the concept, and the offer is backed by credible crypto investors. Avoid with extreme haste any offer pumped by a silly celebrity or heavy on promotional marketing. Also, If the crowdsale is created to back a business that could do fine without Blockchain or a token, this may be a red flag. As the saying goes, if it sounds to good to be true … it probably is.

Several weeks back, CoinList announced the hiring of a new CEO –  Andy Bromberg as they ramp up operations. He explained that CoinList sees the power of a decentralized future and their platform wants to manage the regulatory burden for these token sales.

“CoinList will start by stepping in and providing our expertise around compliance, tactical execution, and marketing. Our vision is to provide an ever-broader set of financial services to these companies: secondary trading, market making, and much more,” said Bromberg.

We caught up with Bromberg to ask a few questions about CoinList and his personal perspective. Asking Bromberg how he got plugged into the AngelList/CoinList world and he explained he got to know a good number of people when he was at the Stanford Bitcoin Group, an advocacy organization for people interested in the BTC space. Bromberg explained that both AngelList and Protocol Labs are the owners of CoinList. No VC’s yet, but they are talking to a few people.

Asked if the Filecoin blowout came as a surprise, Bromberg said yes and no;

“In some sense it was not a surprise at all,” said Bromberg. “It was a real community. It was above and beyond what we had seen in the space before.”

Bromberg said the combination of the team and concept was the perfect setup. Investor interest was intense.

“It was surreal to see the numbers pick up so aggressively,” added Bromberg. “The front end struggled a bit from the overwhelming volume. It was an initial scaling problem. We have since re-architectured the system from the ground up.”

Asked about the BlockStack ICO, Bromberg said they have big expectations for them.

“The team is exceptional. They have apps they have built already. We are excited to be hosting them on the platform. We worked closely with them and a lot of investors in the space.”

CoinList the Future of Initial Coin Offerings

Bromberg believes CoinList is the best ICO platform in the space today and he shared that inbound interest in listing crypto offerings on the site is quite robust. They are currently sorting through hundreds of potential issuers. He said that CoinList will only list compliant offers under Reg D or Reg A+. At least early on.

“We would like to do all sorts of offerings. Initially only Reg D offerings. Get the product out there. We want to be able to offer Reg A+ too. We could do Reg S as well. We are open to anything [commenting on Reg CF]. We could work with a partner with Reg CF. We are unlikely to do a pure Reg CF offering but we could do a parallel [side by side] offering.”

Bromberg said they were open to facilitating a utility token but was not ready to define where the line should be drawn for when a token is a security – and when it is not. He is not alone in this uncertainty as the Securities and Exchange Commission has been a bit slow to draw a bright line for compliance in token driven funding world.

Bromberg explained they have a lot of VCs on their advisory panel but are not partnering with them on ICOs. At least not yet;

“Of course, we want to bring great people into these deals and we will market [these ICOs] to these people.”

Asked how he sees the ICO market evolving and if it can possibly live up to the hype;

“I think what we are going to find there are really great use cases for ICOs. The big one is funding for protocols. Historically, they have been too expensive for individuals [to do]. Typically, they have been funded by governments. They require a lot of capital to get off the ground. I believe there will be massive impact in the space. The ones that are really successful will be massively successful. It is one way to build a network where early participants are highly incentivized. I think we are going to find a lot more use cases. There is a lot of hype right now but I think we will find a lot of use cases and they will be worthy of the hype.”

Competition Between Protocols

Bromberg believes that having more teams building protocols means more competition. More competition means better and more effective services. Previously, there was never any serious competition in certain use cases. Think about the Blockstack ICO. This is a company that wants to create a new internet – one where you control your data and not the big operators or other services that monitor your every move. Which network would you prefer to use? Enough said.

You can imagine a world where several networks are going after the same protocol where the best one will win. This can have impact around the world … Protocols around identity around the web. They all have trade offs. It might be more than one of them wins. Before we would only see one protocol that would win. There is a lot of potential there.”

And what about all of the dodgy ICOs. Should the industry establish best practices? Will a big ICO blowup undermine the entire sector?

“We obviously see sketchy ICOs as bad for the space. There will always be bad actors in the space. As a new vertical gets started of course there will be a lot of noise. I think there will be better reporting standards … with more high quality vs. low quality offerings.”

CoinList operates a ComplyAPI product stack as part of their standard operating procedure for a crowdsale. It is not a fully automated service but it streamlines the process of KYC, AML and accredited investor verification. Bromberg said that each accreditation is verified by an attorney and they have an extensive due diligence procedures in place. They will know who the investors are before they are allowed to participate. They also will white label the service for other ICO platforms. Selling securities is a serious business.

So is CoinList the future of early stage funding? Is AngelList … Dust?

Nope. Not at all. The two platforms are very different operating on a very different model. AngelList is facilitating investments in very early stage companies. On AngleList you are talking about a seed round of a couple of million dollars – small change in the ICO world. ICOs are different because the entire funding round can be completed in one single offering. No more alphabet series of consecutive investments constantly diluting the founders ownership in the company.

“For the most part these ICOs will be the only round the company needs to raise,” explained Bromberg.

Both models will  continue to exist and thrive. Different companies have different needs. But for CoinList, it is just getting started and it is a very exciting time.

[clickToTweet tweet=”‘For the most part these ICOs will be the only round the company needs to raise'” quote=”‘For the most part these ICOs will be the only round the company needs to raise'”]

Blockstack Token Sale Now Open for Registration on CoinList

CoinList has announced their second Initial Coin Offering (ICO), Blockstack, is now open for registration. If you are interested in participating in this investment opportunity, you must register by November 10th to guarantee your allocation. After November 13th, allocations will be distributed on a first come, first served basis.

CoinList entered the ICO space with the blowout offer from Filecoin. The enormous ICO raised $205 million in a few weeks with $135 million being raised in the first 60 minutes of the public offer. Demand was apparently so intense, CoinList struggled to keep the site up as investors poured in.

Blockstack is a four year old operation and a Y Combinator alumni (2014).  The company has already raised $5 milllion in venture funding led by Union Square Ventures along with participation from Naval Ravikant (AngelList co-founder), Lux Capital, SV Angel and more.

Blockstack wants to be part of the next wave of computing. Over the years, computing and the internet have swung between centralized and decentralized utilization. Back in the day, everything was on a monolithic mainframe. This transitioned to the PC (and Mac) desktops and laptops being the dominant platform. The next step in the evolution was cloud computing – once again becoming more centralized. Blockstack is on a mission to accelerate and facilitate the forthcoming decentralization of App based computing. Users will once again be in control of their services and data as the Blockstack blockchain and peer-to-peer network form a secure backbone of the Blockstack network.

Blockstack, which recently became a Public Benefit Corporation, has established a $25 million fund, called the Signature Fund, launched for the creation of decentralized apps built on Blockstack. The fund is said to have received hundreds of submissions within weeks.

The Blockstack Token is a crypto asset that will be used to register digital assets like domain names and applications on the Blockstack network. The Token will be “consumed” when digital assets are registered on the Network. The Blockstack Token is designed to enable new functionality on the network if and when it’s fully developed and successfully deployed on the Network. The Blockstack Token is said to be a “utility token”, that is required to access certain functionality on the Blockstack network but the team expects it to trade on exchanges.

Blockstack is only open to Accredited Investors but Blockstack Token says it is also giving vouchers to users who are not accredited investors. Users can get these vouchers for free by completing the registration process on the Blockstack Token LLC website in the time period starting Nov 1st, 2017 and ending Nov 10th. More information on the Token is available here.

 

Next Up on CoinList is Blockstack Initial Coin Offering

Following the blowout Initial Coin Offering (ICO) by Filecoin that raised an incredible $205 million, CoinList has partnered with Blockstack for its forthcoming token sale.

CoinList was launched by the team behind AngelList and Protocol Labs. Recently, the funding platform announced a revamping as it hired new leadership to capitalize on the burgeoning ICO market. CoinList will sell vetted and compliant tokens by filing the necessary exemptions with the SEC. The Filecoin offering was sold only to accredited investors under Reg D 506c.

Blockstack is developing a new protocol that is said to be building a decentralized internet where users own their own data and apps run locally without remote servers. Blockstack explains that the internet began as an open platform where anyone could publish content and anyone could communicate with anyone else. As the internet has evolved, certain companies started accumulating a large amount of power over people’s experiences on the internet, locking in users and exerting control. Blockstack wants to change all of this and put the users back in control. An overview of Blockstack is available here.  The more detailed white paper may be downloaded here.

Blockstack was started by Ryan Shea and Muneeb Ali in 2013. The two co-founders met at the Computer Science department at Princeton University.

Blockstack currently has a big list of prominent investors including Union Square Ventures, Y Combinator, SV Angel, Naval Ravikant (AngelList co-founder), Shana Fisher and more.

Blockstack is the second ICO on the platform and it will be the first sale utilizing CoinList since becoming an independent company. The offering may be advised in part by a CoinList-affiliated investment advisor.

“We’re excited to partner with Blockstack as our first sale as an independent company.” said Andy Bromberg, CoinList’s CEO. “Most private companies today simply don’t have access to the capital required to build a protocol at the level of complexity that Blockstack is pioneering. Historically, only governments and institutions have access to the funding necessary to build an Internet or network of this size or scale. Fortunately, CoinList has built a platform to make this possible giving companies like Blockstack the opportunity to compete.”

The ICO market is red hot right now. Tokenized offerings have gone from zero to billions in just a couple of years. CoinList will only list legitimate cryptocurrencies and will only work with companies that abide by KYC-AML rules. Blockstack says it has built corporate governance into their sale structure with a new legal framework for token distribution that is inclusive while remaining compliant with regulations. Blockstack is also introducing systems for governance of the sale proceeds and checks and balances for protocol core developers.

Blockstack has also independently raised a “signature fund” this past August. The fund is designed to help build out its app ecosystem by incentivizing developers on the platform to apply for “XPRIZE-style” prizes and bounties for large initiatives such as building a decentralized microblogging platform.

“Blockstack’s focus on building not just impressive technology, but what is ultimately a grassroots movement and community of developers sets them apart.” said Paul Menchov, CoinList’s CTO. “Combined with the progress they’ve made so far, their intentions around compliance, and our shared vision for a decentralized future, they’re an ideal partner.”