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Crypto exchange startup INX Limited eyes $129.5M IPO, marking the first SEC-registered security token sale

Tue, 20 Aug 2019, 09:03 am UTC

Crypto exchange startup INX Limited is reportedly planning to secure $129.5 million through an initial public offering (IPO), according to CoinDesk, citing a prospectus.

As per the report, this will mark the first security token sale registered with the U.S. Securities and Exchange Commission (SEC), and one of the very few full-fledged IPOs in the blockchain industry.

When fully operational, we expect to offer professional traders and institutional investors trading platforms with established practices common in other regulated financial services market, such as customary trading, clearing, and settlement procedures, regulatory compliance, capital and liquidity reserves and operational transparency,” according to the draft F-1 it filed with SEC.

Although the Gibraltar-based firm will target institutional investors, its crypto trading service will be available to the general public. This, however, is subject to the anti-money laundering (AML) and know your customer (KYC) screening.

In addition, the company also plans to establish a platform for trading of derivatives including futures, options, and swaps.

While it is a security, INX tokens can also be deemed as a utility token since holders can opt to use it on the INX Exchange to pay transaction fees. Furthermore, token investors will receive a share of INX’s profits, although they would not be the firm's equity holders.

The securities will reportedly be represented as ERC-20 tokens on the Ethereum blockchain.

The report noted that the SEC needs to find INX’s prospectus as “effective” before it can conduct a token sale. The prospectus includes standard disclosures for publicly listed firms and even executive’s employment contracts.

With its plans to list security tokens, INX needs to become a broker-dealer first, which entails a separate registration with the SEC and acceptance to FINRA, as well as an alternative trading system (ATS) that requires filing additional SEC forms. Moreover, INX also needs money transmitter licenses from the different states it plans to operate its business.

Last month, the SEC has also reportedly given blockchain startup Blockstack a green light to carry out a $28 million digital token offering under Regulation A+. The first token offering approved by the commission will see the company selling SEC approved tokens.

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