Comparing the Different SEC Filings for Blockchain Companies


As of late July, Facebook’s Libra project, a cryptocurrency program that could bring digital coins to billions of Facebook users, still has yet to launch. They cite strict SEC guidelines and a tough regulatory environment as the main hindrance to its development. This tech giant’s failures prove the importance for investors and FinTech companies to understand the different forms the SEC suggests for this new industry.

Form D

This filing document is one of the most popular forms cryptocurrency companies apply for when dealing with the SEC. According to Marketwatch, who investigated the SEC’s database for keywords like “coin”, “ICO”, “token” and “blockchain”, they discovered a growth since 2017 in ICOs through Form D. Many young FinTech companies prefer this action because when filing for a Form D it exempts the company from full SEC registration requirements.

Regulation D is a vital tool companies use to finance their business without going through the IPO process, yet still selling stock to the public. It is a solid method for companies to raise capital and stay within the legal boundaries. However, there are two important stipulations that come with this form. First off, securities may only be sold to “accredited individuals”. This means individuals with a net worth over $1million, those who consistently make at least $200,000 per year in income or companies with over $5 million assets. Secondly, the form must be filed within 15 business days after the first sale of securities.

Now, there is still uncertainty within the industry on whether these initial coins to accredited investors can be through a transferrable non-security process. The minimum time frame for this would be a year, if it is possible. There is also unclarity if the coin holders would still own securities registered under the Exchange Act or non-security coins purchased for  use within that ecosystem.

Regulation A+

The next form investors and companies use is Regulation A+, or sometimes referred to as Mini-IPO. This regulation serves primarily as the middle ground between private capital options like Form D and public options, such as an IPO. Whereas a traditional IPO is for large companies, Regulation A typically lets smaller companies do the same. It allows them to raise capital and cover the expected legal and accounting costs from going public. It also is a relatively short process, taking on average only 78 days for approval.

As for the details behind the law, there are not many. The first restriction is that this exemption form is limited to US and Canadian companies not previously registered with the SEC. With that stated, Regulation A is marketable to all investors regardless of their channel. The second restraint this law has is that the company must decide whether it will fall into two categories with their Mini-IPO. In Tier 1 a company can raise up to $20 million. For Tier 2, organizations can at most make $50 million. A benefit from filing for the second tier is that a corporation’s securities are eligible to be offered on NASDAQ or the New York Stock Exchange.

SAFT Token Offerings

SAFT stands for Simple Agreement for Future Trade and is a contract by cryptocurrency developers offered to accredited investors. The regulation is a simple, inexpensive framework that helps new ventures raise capital and comply to the law. Selling a SAFT lets the company accept funds from an investor but in return they do not exchange a coin. Corporation’s use this investment to further develop their network and technology.

From an investor’s perspective, there are few important stipulations to keep in mind. First off, after buying the agreement investors should receive a documentation indicating that if a cryptocurrency is created, they will get access to the tokens. It is also important to note that they still face the risk of losing their money and rarely can recourse be taken against the company if it fails. The agreement does, on the other hand, allow investors to take a financial stake in the venture. A SAFT is comparable to a Simple Agreement for Future Equity (SAFE), in regards to the risk level.

As FinTech normalizes itself it will be interesting to note the different regulations the SEC will take in ensuring a quality standard of practices. Right now cryptocurrency companies prefer to fill out Form D. This is probably because of the industry’s short existence. As the market grows and companies wish to expand their product further, expect more corporations to fill out Regulation A+ forms and perform more Mini IPOs.

Omari Caldwell is a journalist that specializes in tech, culture, politics and sports. He stays in New Orleans, LA where he attends Loyola University, studying History and Political Science and Spanish.

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