Fundraising via STO is compliant with the US laws, thus it allows crypto companies to sell security tokens to big institutional players. It is something that startups were not able to do before.
Hedera Hashgraph, the blockchain platform seeking to provide a new form of distributed consensus, is a perfect example of the potential this method of fundraising has.
After filing the Reg D 506c with SEC, they have conducted an STO, raising $104,467,509 from over 900 different investors.
Why Form D? Because this type of offering is exempt from full SEC registration requirement. It permitsissuers to broadly solicit and generally advertise an offering, provided that:
- All purchasers in the offering are accredited investors.
- The issuer takes reasonable steps to verify purchasers’ accredited investor status and certain other conditions in Regulation D are satisfied.
According to the law, businesses do not have to file the Form D before STO.
There are 15 days to do that after the first sale of securities in the offering takes place.
However, the most revolutionary thing is that the security nature of tokens allows institutional investors to form part in the STO, it includes pension funds, ETFs, banks, insurance companies, pensions, hedge funds, REITs, investment advisors, endowments, and mutual funds.