Footprint Analytics · 9 hours ago · 7 min read
Reg A+ Cap Expansion Could Attract More ICO Interest Within the US
The United States House of Representatives has recently passed the “Regulation A+ Improvement Act” which will allow for a substantial cap increase under which businesses of all sizes will be able to carry out securities offering while still being subject to Reg A+ guidelines.
The U.S. House of Representatives has recently passed the “Regulation A+ Improvement Act” which will allow for a substantial cap increase under which businesses of all sizes will be able to carry out securities offering while still being subject to Reg A+ guidelines.
As we speak, one of the primary methods of raising money for smaller crypto companies in the US is through the use of Regulation A+. However, since the explosion of the crypto market last year, the previous capsize of $50 million was found to severely restrict the viability of this gateway.
If the bill receives favor within the Senate and is signed into law by The White House, the new cap will be $75 million.
About the Regulation A+ Improvement Act
Reg A+ comes under the Jobs Act and has been designed to streamline the process of raising capital for startup owners. It is thought to be more efficient than IPOs and allows non-accredited investors to participate in upcoming business opportunities much more easily.
When looked at more closely, we can see that Reg A+ serves as the perfect pathway for small to medium-sized businesses to raise money within the US. It also provides additional benefits such as:
- Promotes retail investor participation
- Helps maximize marketing opportunities to investors.
While some might say that Reg A+ is extremely bound and limited in its approach, others will be interested to learn that start-ups have raised over $600 million since October 2017, through the use of this regulatory scheme.
Reg A+ cannot replace ICOs
Even though Reg A+ might look an attractive business opportunity to some, one has to bear in mind that it still does not provide business owners with the same freedom as that of an unregulated ICO market.
For starters, when using Reg A+ regulations, companies are forced to work through SEC approved exchanges exclusively.
In addition to this, Reg A+ also requires AML background checks on each and every investor separately, thereby drastically increasing overall maintenance and overhead costs.
Lastly, to make use of Reg A+, companies need to issue something called “Offering Circulars” to their prospective buyers.
These documents are quite similar to white papers, but require a vast array of specific details, failing which, a company may not be eligible to raise money.
At this point, it should also be mentioned that Reg A+ offerings come in two forms:
- Tier 1: this is a less stringent Reg A+ pathway that does not impose strict regulatory requirements. However, there is an investment cap of $20 million.
- Tier 2: this offering allows companies to raise the full $75 million, but requires them to undergo annual audits as well as post their financial details twice a year.
When looking at the efforts put forth by nations such as Switzerland, Japan to regulate their crypto markets, the impositions of the SEC seem to be more strict and cautious. However, for the time being, these latest suggested Reg A+ changes (via H.R.4263) could help the US crypto market gain more steam.
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