US Crowdfunding Deregulation Opens the Gates for Crypto-Equity

New U.S. SEC Regulation A+ rules regarding equity crowdfunding coming to effect at the end of May 2015 are set to open the gates for crypto-equity and small business crowdfunding, no investor accreditation necessary.

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US Crowdfunding Deregulation Opens the Gates for Crypto-Equity

New U.S. SEC Regulation A+ rules regarding equity crowdfunding coming to effect at the end of May 2015 are set to open the gates for crypto-equity and small business crowdfunding, no investor accreditation necessary. 

In what can only be called the deregulation of the securities rules that affect equity crowdfunding, the U.S. federal government's SEC voted on key changes to the JOB's Act passed by Obama in 2013.

The changes, which have been called Regulation A+, lower the barrier of entry for investors, who no longer have to be accredited investors, or those with a net worth of US$1 million, or a history and expectation of annual income above US$200K per year. Come the end of May, there will be no requirements whatsoever.

This is equivalent to opening Troy's gates to anyone who wants to waltz in and set up shop inside. No longer do the gates only open to aristocrats, very successful entrepreneurs or well-connected politicians. 

Though, as you might expect, there is a catch. A toll at the gates requires issuers to submit reviews of their finances to the relevant authorities, depending on how investors file for compliance.

In short, issuers can raise up to US$50 million in a 12-month period for Tier II filings and up to US$20,000,000 for Tier 1. Those under Tier II are subject to review from the SEC and are not subject to individual state law. Those under Tier I are subject to a coordinated review effort called NASAA, conducted on behalf of individual states.

The good news is that while issuers will need to be cleared by the relevant authorities before sales are deemed compliant, issuers also have some leeway to test the waters. As Crowdfund Insider put it:

“An issuer can ‘test the waters’ and see if there is interest in the offering prior to spending the time and money to [be approved by authorities].  This would be ‘Preview’ mode on SeedInvest where investors can express interest, but can’t yet invest. This is important so that companies don’t have to gamble on their fundraise and can see if there is interest prior to investing in legal and accounting fees.”

This huge development for crowdfunding platforms presents a massive opportunity for funding technologies powered by the blockchain. While decentralized crowdfunding platforms such as Swarm, NXT, Omni, etc., are generally not capable of enforcing compliance, they could facilitate it by offering or partnering up with appropriate legal service providers.

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