President Trump’s Twitter account serves as one of the commander-in-chief’s favorite forums for airing grievances. Politicians, the media, celebrities – Trump doesn’t discriminate when it comes to social media callouts. Now, we can add cryptocurrencies to the list of Twitter targets.
Last week, the president let it be known via tweet that he is “not a fan of Bitcoin and other cryptocurrencies,” citing their volatility and potential to “facilitate unlawful behavior.” Ironically, the admonition came a day after his administration appeared to open up a new fundraising route for crypto companies. On July 10, the Securities and Exchange Commission gave its stamp of approval to a $28 million offering for blockchain company Blockstack to begin hawking digital tokens. It marked the first regulated offering of a digital token.
Blockstack pursued the transaction under Regulation A+, which lets small companies raise as much as $50 million per year through offerings in public markets. Companies that take funds through Reg A+ face accounting and reporting standards that are less stringent than those for companies that go through traditional IPOs. Given these advantages, crypto companies have looked to Reg A+ to get their tokens in circulation. Previously, crypto startups were engaging in unregulated initial coin offerings that combined to raise billions of dollars – and also drew prolonged SEC scrutiny.
Blockstack reportedly poured around $2 million into the effort to gain the SEC’s blessing for its sale during a 10-month period. While Blockstack was trying to make its Reg A+ offering a reality, New York-based startup YouNow was also working with the Commission to bring its digital token, Props, to the market. On July 11, the video-streaming company revealed the SEC had approved Props for a Reg A+ qualification.
Props works with YouNow and other streaming services, with the tokens serving as rewards for users and content creators. The company said in a filing with the SEC that it is now distributing more than 175 million Props tokens valued at approximately 14 cents per token. YouNow actually pre-sold the tokens to a variety of private equity shops and investors, raising $21 million in the process.
So crypto companies now have two examples of how to pull off an offering under Reg A+. How many of Blockstack and YouNow’s peers will want to follow their lead? Digital tokens appeal to some users, including an unsavory segment, specifically because they trade “off the grid.” A regulated cryptocurrency probably won’t draw their interest.
Mainstream investors, meanwhile, can finally dip a toe in the crypto market with the qualification of the SEC (if not Trump).