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US companies may soon gain a new way to raise large amounts of capital by issuing their own cryptocurrencies. The proposal could help make so-called token financing a new fundraising option for startups in the US.
SEC Unveils Digital-Asset Proposal
Would Allow Issuers to Sell Their Own Tokens Without Securities Registration
According to the cryptocurrency industry on Aug. 19, the US Securities and Exchange Commission released the proposed digital-asset rules on Aug. 18. The proposal would establish a simplified process for companies in the US to issue coins and tokens to raise funds.
Under the plan, US companies seeking smaller amounts of funding could raise up to $5 million through a token sale once over a four-year period. That would give early-stage startups a way to cover development costs. Companies seeking larger sums could raise as much as $75 million in a one-year period. In return, they would need to disclose details including their business operations and plans for using the proceeds. Companies raising up to $75 million a year would also have to submit financial statements and continue reporting on their management status afterward. The approach would reduce the burdensome securities-registration process required for an initial public offering while still requiring the disclosures investors need to make decisions.
Until now, such token offerings in the US have faced a high risk of being treated as unregistered securities sales, making them difficult for American companies to use. If the proposal takes effect, companies could fund their businesses with their own tokens instead of issuing additional shares or taking out loans. An artificial-intelligence startup, for example, could sell tokens to investors and use the proceeds to buy graphics processing units, or GPUs, or develop AI models.
SEC Chairman Paul Atkins said the proposal is intended to provide crypto companies and market participants with a clear path to raise funds under securities laws. The broader aim is to promote innovation in the US digital-asset industry, reduce incentives for companies to operate overseas and expand investment opportunities for American investors.
Kim Min-seung, head of research at Korbit, said the proposal would sharply reduce legal uncertainty around fundraising through token issuance in the US. For startups with limited financing options, it could become a new alternative that complements traditional stock and bond issuance.
Cho Mi-hyun, Hankyung.com reporter, mwise@hankyung.com
#Token Financing
#Crypto Regulation
