Curating Blockchain Securities

44 minute read

The term “security” is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation—via stock—a creditor relationship with a governmental body or a corporation—represented by owning that entity’s bond—or rights to ownership as represented by an option. - Investopedia

Security Tokens (STO)

Simple Agreement Future Tokens (SAFT)

Native Exchange Token

Institutional Derivitives



Reg CF

  • Disqualification of Felons and Other “Bad Actors” from Rule 506 Offerings and Related Disclosure Requirements
  • Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers

    Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period: - If either of an investor’s annual income or net worth is less than $107,000, then the investor’s investment limit is the greater of: - $2,200 or - 5 percent of the lesser of the investor’s annual income or net worth. - If both annual income and net worth are equal to or more than $107,000, then the investor’s limit is 10 percent of the lesser of their annual income or net worth. - During the 12-month period, the aggregate amount of securities sold to an investor through all Regulation Crowdfunding offerings may not exceed $107,000, regardless of the investor’s annual income or net worth. Spouses are allowed to calculate their net worth and annual income jointly. This chart illustrates a few examples of the investment limits:

  • First Republic ICO Sees Strong Demand as Platform Introduces New S…

    Republic, a Reg CF crowdfunding platform, listed its first Initial Coin Offering (ICO) this past week. Republic Crypto offered the security in conjunction with CoinList that is hosting the offer for accredited investors under Reg D (506c). Both CoinList and Republic are the c…

  • Republic Crypto’s Token Debt Payable by Asset (DPA) - Jobs Act L…

    A look at the first compliant, inclusive blockchain financing and investment platform.

  • Crypto, meet compliance — Republic

    Simple. Compliant. Proven. The first platform to deliver fully compliant fundraising. Our services are fully SEC-registered, FINRA regulated. Don’t worry about where your investors are based or whether they are accredited. We can handle it.

  • Introducing the Token DPA, a blockchain focused Securities Instrument

    As a securities attorney first and foremost, I most appreciate that a company can offer the Token DPA or a SAFT to accredited investors and the Token DPA to unaccredited and international investors allowing them to include everyone in their financing / pre-sale. By expanding the pool of participants, this potentially lessens the likelihood that tokens derived from these instruments are considered securities, due to the widely available pre-order effect allowing anyone and everyone to participate provides.

  • Report to the Commission Regulation Crowdfunding

    This is a report by the staff of the U.S. Securities and Exchange Commission. The Commission has expressed no view regarding the analysis, findings, or conclusions contained herein.

  • The SEC Publishes Report on Reg CF: ‘The number of crowdfunding of…

    The Securities and Exchange Commission (SEC) has published a statutory report on Regulation Crowdfunding commonly referenced as Reg CF. The mandated report must be forwarded to Congress three years after Reg CF rules became effective (May 2016). Reg CF is the smallest of thre…

    itle III added new Section 4(a)(6) to the Securities Act of 1933,7 which provides an exemption from the registration requirements of Securities Act Section 58 for certain crowdfunding transactions. Regulation Crowdfunding, which prescribes the rules governing the offer and sale of securities under Section 4(a)(6), pe r mits an issuer to raise a maximum aggregate amount of $1.07 million in a 12-month period,9 limits the amount individua ls may invest in offerings under the exemption,10 requires issuers to disclose certain information about their business and the offering,11 and creates a regulatory framework for the intermediaries that facilitate the crowdfunding transactions.1

    According to this market participant, marketing costs tend to vary by issuer, totaling up to 20% of the target offering amount. For example, a high-quality videographer usually costs about $2,000-$5,000 dollars. This is not surprising, given that another industry study has documented the importance of having a high-quality video for the success of a crowdfunding campaign.65 Also according to this market participant, bank and transaction fees also may vary depending on the type of back-end infrastructure developed by the intermediary and the type of securities offered (e.g., equity vs. debt). Some fees, such as transfer agent fees, could be on an annual basis, while others could be on a per-investor basis. One intermediary responding to the look-back survey also estimated that issuers spent approximately three to four weeks to prepare their Form C. Additionally, this intermediary stated that most issuers use cash accounting and spent thousands of dollars both to prepare financial statements that instead comply with U.S. generally accepted accounting principles (“U.S. GAAP”) and then to have those financial statements reviewed or audited by an independent auditor.

  • Compliance with Reg CF: When failure becomes fraud - CrowdCheck

    As previously identified in a CrowdCheck investor alert here, a significant number of companies that have raised funds under Regulation Crowdfunding are no longer in business. That is to be expected. Early stage companies have a high rate of failure, and investors should unde…

  • How Much Does a Regulation Crowdfunding Campaign Actually Cost?

    The following is a reprint of a story Sherwood Neiss wrote for Venture Beat. The original can be found here. The full report is available for paid download: I wrote this article because I was irritated by reporters calling me and saying, “I’ve heard that a Regulation Cro…

  • Reg CF Closes the Year at $161.5 Million in Crowdfunding. Total fo…

    The StartEngine Index tracking Reg CF crowdfunding issuers was published a few days ago. According to StartEngine, total successful offerings since the securities exemption was launched in May of 2016 now stands at $161.5 million. So how does 2018 compare to the year prior?

  • Regulation Crowdfunding 101 For Entrepreneurs - StartEngine

    So you’re interested in raising capital through Regulation Crowdfunding but want to learn more before taking the plunge? Then this article can help you learn the basics and hopefully answer some of your questions along the way. Tl;dr: Regulation Crowdfunding became legal in…

  • 46 FINRA Approved Reg CF Crowdfunding Portals - EquityDoor

    January 6, 2019 @ 5:00 pm By JD Alois Reg CF (or Regulation Crowdfunding as it is inconveniently called) is a securities exemption that enables companies to raise up to $1.07 million online via a regulated funding portal or broker-dealer. The concept of a funding portal …

  • Think Twice About a Low Target Amount in Title III Crowdfunding

    Many Title III Crowdfunding issuers are setting “target amounts” as low as $10,000. Here’s why you should think twice:

  • Best Equity Crowdfunding Platforms

Reg D

Keep in mind that you must raise funding from “accredited investors” for the Form D exemption to apply as noted in Rule 506 of Regulation D . These are investors who usually earn over $200,000 a year or are worth at least $1 million. You can also offer securities to companies worth at least $5 million. By either registering with the SEC or filing Form D, a business has taken the time to show they’re not providing an illegal public offering.

  • Form D: Everything You Need to Know

    Form D is a filing with the SEC that allows companies under Regulation D or Section 4(6) exemption to offer stock to finance businesses without doing an IPO.

  • The Definitive Guide to Regulation D - WealthForge

    While Regulation D offerings are exempt from registration with the SEC, both the SEC and the various states require filings providing notice that an offering is occurring. The SEC requires an issuer to file notice on Form D within 15 days of the date of first sale of a Reg D security on the SEC’s Edgar System. Form D contains basic information about the offering and the issuer, including industry, whether a broker-dealer is involved, and the amount being raised. In addition, for each state into which the security is sold, the issuer must file a notice filing within 15 days of the first sale in that state. The majority of states use an online database to allow electronic filing. Additionally, with this notice filing, the states require the issuer to pay a filing fee, usually between $100-$500.

  • 3 Ways Reg D Issuers Can Control Offering Costs

    Developing a successful Reg D offering can be an expensive. These tips will help you reduce the cost of your offering and help you better allocate your time.

  • Private Placements: What happens if you fail to file Form D (or fi…

    Form D is a document that the SEC requires a company to file when it issues securities in a private placement under Regulation D. It must be filed with the SEC within 15 days of the first sale of a…

  • Rule 506 of Regulation D -

    Rule 506 of Regulation D provides two distinct exemptions from registration for companies when they offer and sell securities. Companies relying on the Rule 506 exemptions can raise an unlimited amount of money. Under Rule 506(b), a “safe harbor” under Section 4(a)(2) of the Securities Act, a company can be assured it is within the Section 4(a)(2) exemption by satisfying certain requirements, including the following: The company cannot use general solicitation or advertising to market the securities. The company may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchasers. All non-accredited investors, either alone or with a purchaser representative, must be sophisticated—that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. This means that any information a company provides to investors must be free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading. Companies must give non-accredited investors disclosure documents that are generally the same as those used in Regulation A or registered offerings, including financial statements, which in some cases may need to be certified or audited by an accountant. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well. The company must be available to answer questions by prospective purchasers.

  • Security tokens in the US: regulations and exemptions under the SE…
  • - Answers: Regulation D Offerings
  • Rule 504 of Regulation D: A Small Entity Compliance Guide for Issuers
  • Section 3b Securities Registration Exemption

    This material discusses section 3b securities registration exemption of the Securities Act of 1933.

Reg A

Blockstack, founded in 2013, spent ten months and $2.8 million on its Reg A+ offering. Reg A+ was adopted as part of the 2012 Jumpstart Our Business Startups Act (the “JOBS Act”), and has fewer disclosure requirements than a full-blown registration statement on Form S-1.

  • The SEC Clears an ICO under Regulation A+: Blockstack Holds the First Regulated Token Offering

    Buyers of Tokens will not have any equity ownership in Blockstack, but rather will be able to use the Tokens as currency or fuel in Blockstack’s network, a blockchain-based software platform on which developers can build “decentralized applications.” The Blockstack network has been functional since 2015 and has over 100,000 registered users and 171 live applications. The company funded the development of the Blockstack network with $5 million in venture capital financing and $47 million raised from a 2017 token offering that used Regulation D as an exemption under the U.S. securities laws.

  • Cole-Frieman & Mallon Presenting a Digital Asset Legal Update for 2020

    Through considerable time and cost, Blockstack submitted its Regulation A+ “Tier 2” offering to the SEC for “qualification” to publicly sell its tokens (Stacks Tokens) on April 11 2019. We have reviewed all 203 dense pages of Blockstack’s Offering Circular (which is estimated to cost $1.8M in legal and accounting fees to produce) and take this opportunity to discuss the unique characteristics of the the offering which any token project will need to address in the future. While we can see that this will be the first step in standardizing token offerings under Regulation A+, we also see that there are a number of legal, business and operational issues that any token sponsor will need to address in what will inevitably be a “not as easy as advertised” process with the SEC.

  • Amendments to Regulation A: A Small Entity Compliance Guide - Eligible Issuers and Securities

    Regulation A is available only to companies organized in and with their principal place of business in the United States or Canada. Regulation A is not available to: - companies registered or required to be registered under the Investment Company Act of 1940 and BDCs; - development stage companies that have no specific business plan or purpose or have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies (often referred to as, “blank check companies”); - issuers of fractional undivided interests in oil or gas rights, or similar interests in other mineral rights; - issuers that are required to, but that have not, filed with the Commission the ongoing reports required by the rules under Regulation A during the two years immediately preceding the filing of a new offering statement (or for such shorter period that the issuer was required to file such reports); - issuers that are or have been subject to an order by the Commission denying, suspending, or revoking the registration of a class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five years before the filing of the offering statement; and - issuers subject to “bad actor” disqualification under Rule 262. The final rules limit the types of securities eligible for sale under Regulation A to the specifically enumerated list in Section 3(b)(3) of the Securities Act, which includes warrants and convertible equity and debt securities, among other equity and debt securities. The final rules exclude asset-backed securities from the list of eligible securities.

  • Form 1-A Younow, Inc. Offering Statement [Regulation A]
  • Republic is “Testing the Waters” of the SEC’s Reg A Exemptio…

    As of April 5th 2019, crowdfunding platform Republic has announced the launch of a blockchain-powered token. The token will be given away to users of its platform for free, but by the end of the year, will feature revenue distribution. Republic claims to be “testing the wat…


Howto Securities

  • A Guide to Launching a Security Token Offering

    In the future, a majority of stocks, bonds, commodities and other financial assets will be tokenized. These are the step by step ways to start on that path.

    The first and most important step in beginning an STO is finding the right securities lawyer. With the infancy of security tokens and their intersection with crypto assets, an experienced lawyer is invaluable. Seeing as the majority of security offerings target US investors, a veteran lawyer can be the crucial difference between a successful raise and a subpoena from the SEC — ultimately killing your business dead in its tracks. Your lawyer will be responsible for regulatory filings (Reg D, Reg A+, Reg S or CF), collateral compliance and the proper disclosure of offering terms including but not limited to participation rights and warrants. Generally speaking, the filings and retainer will be the most expensive upfront costs for a security token offering.

  • Fitzner Blockchain Consulting - Home

    Blockchain and cryptocurrency consulting is just where we start. From there we can help with white papers, investor management, project coordination and much more.

  • Op-Ed: Sufficiently Decentralized HoweyCoins

    2018 July 01 OP-ED 2018 July 01 OP-ED Sufficiently Decentralized Howeycoins. Tim Swanson, Post Oak Labs SEC Director Hinman gave a public speech about three weeks ago which was subsequently affirmed by testimony from Chairman Clayton the following week. A key point in his spe…

  • Security tokens in the US: regulations and exemptions under the SE…
  • From Initial Coin Offerings to Security Tokens: A U.S. Federal Securities Law Analysis

    Cryptocurrencies and initial coin offerings (ICO) are all the rage in startup financing. Until mid-2017, these ICOs existed in a wild west environment, a regulatory limbo, with some companies raising hundreds of millions of dollars in days and others crashing and burning in the same amount of time. Like Wyatt Earp in Dodge City, the Securities and Exchange Commission declared its jurisdiction over these ICOs, laying down the law in the “DAO Report” with the legal equivalent of a double barrel shotgun. The SEC was right to do so. There is no doubt that the overwhelming majority of ICOs involve the sale of securities and companies who ignore this conclusion do so at their own risk. Yet the law of ICOs and digital token financing is by no means final or clear, and with little official guidance to go on, startups are left to fend for themselves in a sea of self-declared experts. Few scholarly articles to date have addressed the regulatory status of these ICOs from a securities law perspective. This article provides a legal framework and method for analysis in the aggressive, case-by-case approach laid down by the SEC in the DAO Report, and recommends best practices for companies considering an ICO to follow

  • How To Run A Successful Security Token Offering In Compliance With…

    After 2 years, the SEC has finally put forth a framework for determining whether a token sold in an ICO is under their regulatory purview. This guide addresses how to prepare a security token offering and the issues you need to consider to get started on your token offering j…

  • Security Token Offerings (STOs) - All You Need to Know - Moonwhale -

    Security Token Offerings (STO) are the new method of fundraising. Originally, ICOs were thought to be killers of the space but due to the..


    For the statutory law, I have found after many years of experience that it’s very worth it to take 8-16 hours and read the actual statutes. Such as the Securities and Exchange Act, Reg S and the recent JOBS Act changes should be required reading for startup CEOs raising money. Sure, you won’t get all the case law nor the later additions, but you’ll understand what the overall framework is. Then you can discuss specifics with a lawyer. Also if you’re a startup, some lawyers may take an advisor equity in exchange for 4 hours a month or so.

    What led me to this conclusion is that after years and years of asking random questions while lawyers set everything up, I kept discovering new things about the exchange act until I just read it.

    There are standard docs these days on docracy and other sites for most things. The JOBS Act has simplified fundraising quite a bit for startups. Especially if you use rule 506b for friends and family, you can later choose to go the VC route OR use rule 506c or Reg CF for access to liquidity using public solicitation.


    A final note about security tokens. An obscure but very useful fact is that non-equity securities do not have a limit on how many investors you can have, before you must become a publicly reporting company. And selling to NON US investors they may be able to trade your securities after 40 days. However, their local jurisdiction may have other ideas, and this is one of those areas where you can either try to abide by all local laws in theory, or in practice take advantage of the fact that, in early stages, governments of foreign jurisdictions aren’t going to waste too much political capital on long-arm actions to go after US corporations because they failed to prevent an overseas investor from selling their securities early.

    I am not a lawyer!!

  • Security Token Issuance Platforms - Alt Asset Allocation

    The right security token platform can provide users with a wide range of potential investors, enabling issuers to attain funding targets quicker.

  • ‎Token Talks – Interviews with the Best Projects in Crypto: Co…

    ‎Show Token Talks – Interviews with the Best Projects in Crypto, Ep CoinList: A Trusted Platform for Compliant Token Sales - Apr 9, 2019

  • CoinList

    CoinList is where the best crypto projects in the world raise capital and grow their communities


  • North American Securities Administrators Association (NASAA)

    represents state and provincial securities regulators in the United States, Canada and Mexico.

    NASAA members are the closest regulators to local communities, small businesses and the investing public throughout North America. Members of NASAA have a multifaceted mission of protecting investors from fraud and abuse, conducting investor education, providing guidance and assistance via the established regulatory framework, and ultimately helping power the North American economy by ensuring the integrity of the financial markets.

  • You searched for crypto - NASAA
  • NASAA Updates Coordinated Crypto Crackdown - NASAA

    August 28, 2018:Borg: “State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry …

  • Informed Investor Advisory: Cryptocurrencies - NASAA

    Before you jump into the crypto craze, be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds. And because these products do not fall neatly into the existing federal/state regulatory fr..

  • NASAA Releases Annual Enforcement Report - NASAA

    Pieciak: “The results from this year’s enforcement survey demonstrate that state securities regulators continue to play a critical role in protecting investors and holding securities law violators responsible for the damage that they cause to individual investors specific…


    May 21, 2018:Borg: “The actions announced today are just the tip of the iceberg.”

  • Mike Pieciak: NASAA – A “To The Moon” Approach to Regulating…

    We’re joined by Mike Pieciak, President of the North American Securities Administrators Association. In 2018, “Operation Cryptosweep” investigated over 200 ICOs for potential investor fraud.


  • - Statement on Digital Asset Securities Issuance and Trading

    Statement by Divisions of Corporation Finance, Investment Management, and Trading and Markets on digital asset securities issuance and trading.

  • Introducing ShapeShift Membership - ShapeShift
  • Decentralized Exchanges: A Regulator’s Dilemma

    When Satoshi conceived of the Bitcoin blockchain in the aftermath of the Great Recession that erased 25% off the equities market in a…

  • Decentralized Exchanges: Where’s the DEX Race Heading? - NewsBTC

    In recent times, concept of decentralized exchanges DEX has caught up, as various industry players try to stay true to the founding philosophy of Bitcoin.

  • What Crypto Exchanges Do to Comply With KYC, AML and CFT Regulations

    Top fiat-to-crypto exchanges are adopting market surveillance technologies. Of all crypto-to-crypto exchanges, only Binance has one.

  • How Decentralized Exchanges Are Regulated — Part I (Securities)

    Can DEXs be decentralized enough to be above the law? See what SEC said about it and learn a lesson from EtherDelta.

  • Resistance ICO — Can a decentralised exchange survive Regulation?

    In this article — I discuss initial due diligence into Resistance ICO (ResDex), sharing concerns and thoughts around the team, USP’s and…

  • Etherdelta - how to regulate decentralised exchanges? - Lexology

    On 8th November 2018, the US Securities and Exchange Commission (SEC) announced that it had settled charges against Zachary Coburn, founder of…

  • Electronic Cash, Decentralized Exchange, and the Constitution Peter Van Valkenburgh

    Regulators, law enforcement, and the general public have come to expect that cryptocurrencytransactions will leave a public record on a blockchain, and that most cryptocurrency exchangeswill take place using centralized businesses that are regulated and surveilled through the BankSecrecy Act. The emergence of electronic cash and decentralized exchange software challengesthese expectations. Transactions need not leave any public record and exchanges can beaccomplished peer to peer without using a regulated third party in between. Faced withdiminished visibility into cryptocurrency transactions, policymakers may propose newapproaches to financial surveillance. Regulating cryptocurrency software developers andindividual users of that software under the Bank Secrecy Act would be unconstitutional underthe Fourth Amendment because it would be a warrantless search and seizure of informationprivate to cryptocurrency users. Furthermore, any law or regulation attempting to ban, requirelicensing for, or compel the altered publication (​e.g.​ backdoors) of cryptocurrency softwarewould be unconstitutional under First Amendment protections for speech.

  • ‘Decentralized’ Exchange IDEX to Introduce Full KYC - Bitcoin News

    IDEX, the world’s most popular decentralized exchange, is to transition to a full verification model. The move comes days after the platform began IDEX, the world’s most popular decentralized exchange, is to transition to a full verification model.

  • Centralized or Decentralized Exchange. Regulated DEX is the Answer

    One of the perceived aims of cryptocurrency and blockchain is the decentralization. But at the same time, the vast majority of crypto-based exchanges, are fully centralized.

  • Polymath Tests Show Security Tokens Can Be Compliant on a DEX - Co…

    Polymath says its tests showed security token trades on a decentralized exchange would only complete if authorized.

  • SEC enforcement threat driving KYC/AML implementation at decentral…

    IDEX’s decision to implement KYC/AML policies will likely be followed by most other decentralized exchanges, as the SEC brings new enforcement proceedings against exchange operators.

  • FinCEN Takes First Enforcement Action Against P2P Cryptocurrency E…

    FinCEN has assessed a civil money penalty for a California resident accused of violating money transmission laws.

  • Binance DEX: Navigating Country-Specific Cryptocurrency Trading Re…

    Binance blocks traders in 29 other countries from its DEX website but say affected users can utilize supported wallet apps or VPNs to bypass the restriction.

  • Op Ed: Understanding the Latest FinCEN Guidance for Cryptocurrencies

    Peer-to-Peer: Services like LocalBitcoins or OTC trading, are still MSBs if the buyer or seller is advertising the services and/or making a profit from either crypto-to-crypto or fiat-to-crypto exchanges. CVC Wallets: A new four-factor test is created to determine if a wallet provider needs to register as an MSB: (a) who owns the value; (b) where the value is stored; (c) whether the owner interacts directly with the payment system where the CVC runs; and (d) whether the person acting as the intermediary has total independent control over the value.

    Trading Platforms and DEXs: “Under FinCEN regulations, a person is exempt from money transmitter status if the person only provides the delivery, communication, or network access services used by a money transmitter to support the money transmission services.” So if you only provide a forum where buyers and sellers of CVC post their bids and offers (with or without auto-matching of counterparties), and the parties match through an outside venue (individual wallet or other wallet not hosted by the trading platform), the trading platform does not qualify as a money transmitter under FinCEN. If, when the match takes place, a trading platform purchases from the seller and sells to the buyer, it’s a CVC exchanger and thus falls under the definition of money transmitter.

  • - Statement on Potentially Unlawful Online Platforms for T…

    Statement on Potentially Unlawful Online Platforms for Trading Digital Assets Divisions of Enforcement and Trading and Markets March 7, 2018 Consultation with Securities Counsel and the SEC Staff We encourage market participants who are employing new technologies to develop trading platforms to consult with legal counsel to aid in their analysis of federal securities law issues and to contact SEC staff, as needed, for assistance in analyzing the application of the federal securities laws.In particular, staff providing assistance on these matters can be reached at you just need to drop them an e-mail, SEC will be happy to eat yer soul with kindness and patience

  • The Future of DEXs - Asia Blockchain Review - Gateway to Blockchai…

    Decentralized exchanges (DEXs), which are non-custodial by nature, were also much more secure than their centralized counterparts.

  • Decred Founder Proposes Building DEX to Rival Binance [Interview]

    Decred founder Jacob Yocom-Piatt proposed a decentralized exchange that would solve some of the issues with Binance and other centralized exchanges.

  • OG Exchange LocalBitcoins Is Moving Away From Anonymity

    A longtime haven for anonymous bitcoin trading is conforming to government regulations.

  • SEC’s Action Against Decentralized Exchange Raises Constitutiona…

    A recent public statement from the U.S. Securities and Exchange Commission implied that those engaged in writing and publishing code might need to worry about running afoul of securities laws. In its statement about the cease and desist order against the co-founder of decentr…

  • List of Decentralized Exchanges - Best DEX Decentralized exchanges

    A decentralized exchange (DEX) is a cryptocurrency exchange which operates in a decentralized way, without a central authority.