US SEC Simplifies the Fundraising Process for Crypto Startups

Recently, the financial watchdog in the United States, the Securities and Exchange Commission (SEC) increased the limit of crowdfunding. Previously, it had been at $1.07 million, but the new limit is now set at $5 million. This would certainly be helpful for crypto startups in the country because it would reduce their reliance on venture capital funding and simplify the fundraising process as a whole. The limits that had been imposed on Regulation Crowdfunding were recently relaxed as part of a package. This package comprises of several amendments that have been made to the exemption offering framework.

With this move, legal pathways will open up for crypto startups that they will be able to use for funding their operations instead of using the existing and limiting venture capital options. Regulation Crowdfunding provides companies the option of being able to get securities offerings without first having to register with the Securities and Exchange Commission (SEC). Instead of doing so, they can directly reach out to small investors and ask them for non-accredited investors for launching their business. According to the SEC, it is possible for anyone to invest in a crowdfunding offering based on securities. 

However, the amount that will be invested depends on the annual income and the net worth of the individual in question. Under the new rules, accredited investors don’t have to deal with any limits when it comes to making an investment. Non-accredited investors, on the other hand, will have to take into account their net worth and their annual income for calculating their investment limits. This will certainly boost the amount that can be invested in a period of 12 months. As the rules have now been relaxed by the SEC, it would be possible for crypto startups to raise five times more funds than they could previously.

A number of crypto companies had had to put up with the SEC that took action against them for big token sales, which had proven to be quite detrimental for the industry as a whole. Gabriel Shapiro, BSV law partner, said that the new rules dictated that crypto companies do not have to register with the Securities and Exchange Commission (SEC) for the purpose of crowdfunding. In addition, they also don’t have to wait for or depend on venture capitalists for funding their startups. However, he also added that the tokens that are sold through the Regulated Crowdfunding exemption would be lacking in liquidity because they would still be regarded as restricted securities.

He also disclosed that if this lack of liquidity persists, it would eventually drive the crypto startups towards venture capitalists rather than opting for crowdfunding. As far as the overall benefits are concerned, the relaxation does provide startups with a greater range of options to explore when they wish to raise money for their business ideas. It is quite surprising coming from the SEC, which has recently made moves against a number of crypto-related businesses for one reason or another.


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