Yesterday token and cryptocurrency exchange firm INX published a U.S. Securities and Exchange Commission registration for its first funding round as a sale of security tokens. The debate over whether blockchain-based tokens are securities as defined in U.S law is ongoing, but it appears that INX is not choosing a side. The firm aims to build two separate trading platforms – one for tokens designated as securities, one for tokens which are not.
INX is offering 130 million of its Ethereum (ERC20) based tokens as an investment, hoping to raise up to $129.5 million. They can also be used as payment for transaction fees on its upcoming trading platform for securities and come with a discount.
But the company still needs to get the required clearances. Gibraltar registered INX is awaiting approval from FINRA in the U.S. and sign off from the SEC on its prospectus. In Europe, it plans to seek approval from the Gibraltar Financial Services Commission. By accepting that some blockchain-based tokens are indeed securities, INX hopes to be a major institutional exchange for them.
Its separate cryptocurrency exchange aims to set itself apart with professional trading tools, such as more technical analysis. INX also cites lack of regulatory compliance and scalability of conventional crypto exchanges as motivation for a new platform. It looks like the firm hopes to take aspects from both traditional stock trading and blockchain-based token trading to create a ‘best of both worlds’ exchange.
INX is one of the very few firms to register its sale of tokens as a security. There have been others that were approved under SEC exemptions (Reg A+) which caps the amount raised at $50 million.
The approach of INX is in contrast to the high profile $100 million ICO of messaging app Kik, which was sued by the SEC. The SEC thinks that the ICO was an unlawful sale of securities, but the firm disagrees.
While the SEC is generally considered to be firmly on the cryptocurrencies are securities side, a Commissioner recently suggested a ‘safe harbor’ for some digital assets.