According to Coindesk's August 20 report, the incremental exchange startup INX Limited plans to raise $129.5 million through an initial public offering (IPO), which has filed its first securities-based token sales registration application with the US Securities and Exchange Commission (SEC).
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You are not mistaken, this is not the first time the token issue "ICO" spelling mistakes, this is indeed an IPO. INX, based in Gibraltar, submitted a draft F-1 (SEC's prospectus form for foreign issuers) to the SEC on Monday, which will sell tokens to retail and institutional investors through IPOs.
Therefore, this is an important milestone, because so far, no one token sales have been registered in the SEC. Some issuers limit marketing to large investors, so they are exempt from registration requirements and simply submit a notice to the US Securities and Exchange Commission. Most don't even tell regulators what they are doing, and in the past year, the SEC has filed a series of cases of illegal sale of unregistered securities by the ICO team.
In addition, INX's token sales will be one of the few mature IPOs in the blockchain industry, which is almost certainly the largest. Last year, mining subscription company Argo Mining raised $32.5 million through an IPO on the London Stock Exchange.
Although the target user group of the INX exchange and the INX token is primarily an institutional investor, as long as the exchange passes the “anti-money laundering” and “know your customer” (KYC) screening, its cryptocurrency transactions can be opened to the public. The draft prospectus reads:
“After full operation, we want to provide professional traders and institutional investors with a mature trading platform that, like other regulated financial services markets, will include customary trading, clearing and settlement procedures, regulatory compliance, capital and Liquidity reserves and operational transparency."
In this way, INX will compete with some of the agency-focused, regulated trading platforms launched this year—although INX has a broader range of digital assets that it plans to list, giving it a certain edge. It continues to write in the prospectus:
“Our vision is to establish two trading platforms and a securities token to provide clear and regulated services to the blockchain asset industry. We plan to differentiate each type of securities and non-securities blockchain asset classes and open each category. Asset trading to achieve this goal. In the future, we intend to establish a trading platform covering derivatives such as futures, options and swaps."
This means that the exchange will not only compete with Overstock's tZERO (security token), Coinbase Prime and Fidelity Digital Assets (spot cryptocurrency), but also with the Intercontinental Exchange's Bakkt (derivatives).
Although the INX token is a security, it can also be described as a utility token because the holder can choose to use it at the INX exchange to pay for the transaction.
This may be ironic, because in the 2017 ICO boom, many token dealers argued that their tokens were not securities because tokens effectively used features, such as the right to use the platform developed by the sale.
At the same time, although INX token investors are not shareholders of the exchange, they can pay dividends from INX's profits.
Moreover, if exchanges are liquidated, they can also be paid in preference to shareholders. In this sense, this token is more like a preferred stock. The prospectus writes:
"The company's intent is that, in terms of liquidation rights, INX token holders' default claims will take precedence over the company's common stock holders."
It is reported that the securities will be issued in the Ethereum blockchain in the form of ERC-20 tokens.
Cumbersome application process
Since crypto assets are a new and unprecedented thing, it is difficult to classify them into traditional asset classes, so different regulators claim to have jurisdiction over different areas of the industry.
For INX, this means that it must be approved by multiple regulatory agencies. Before INX sells tokens, it still needs to make the SEC think its prospectus is "effective."
For listed companies, the prospectus is a standard information disclosure, but in the mysterious field of encryption, information such as the employment contracts of executives is rarely disclosed or even unheard of.
That's just for financing things. In order for the exchange to actually open the deal, several other approvals must be obtained.
Since INX will list some securities tokens, it must first become a broker dealer, which requires a separate registration with the US Securities and Exchange Commission and a license from the US Financial Supervisory Authority (FINRA) and a set of alternative trading systems ( ATS), this requires an additional form to be submitted to the SEC.
In addition to obtaining securities-related approvals, INX also needs to obtain the currency transmitter license of the state in which it operates in order to operate as a cryptocurrency exchange so that investors can trade currencies such as Bitcoin.