Securities Token Offerings (“STO”) or Initial Coin Offerings (“ICO”)
ICO stands for "initial coin offering," and refers to the creation and sale of digital tokens. All virtual coins or tokens that are offered or sold on BANQ® are classified as securities. All ICOs offered on BANQ® as securities and will be refered to as a "STO "or Security Token Offering.
What is a blockchain?
A blockchain is an electronic distributed ledger or list of entries – much like a stock ledger – that is maintained by various participants in a network of computers. Blockchains use cryptography to process and verify transactions on the ledger, providing comfort to users and potential users of the blockchain that entries are secure. Some examples of blockchain are the Bitcoin and Ethereum blockchains, which are used to create and track transactions in bitcoin and ether, respectively.
What is a virtual currency or virtual token or coin?
A virtual currency is a digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account, or store of value. Virtual tokens or coins may represent other rights as well.
Who issues virtual tokens or coins?
Virtual tokens or coins may be issued by a virtual organization or other capital raising entity. A virtual organization is an organization embodied in computer code and executed on a distributed ledger or blockchain. The code, often called a “smart contract,” serves to automate certain functions of the organization, which may include the issuance of certain virtual coins or tokens.
Investing in Tokens are a highly speculative investment and could result in the loss of your entire investment.
A purchase tokens is significantly speculative and involves significant risks. Tokens should not be purchased by any person who cannot afford the loss of his or her entire purchase price.
Tokens have the potential for significant volatility and price movement.
The value of cryptocurrencies may be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility, which could adversely affect an investment in the Securities.
Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. The market price for cryptocurrencies and other digital assets, is determined using data from various cryptocurrency exchanges, over-the-counter markets, cryptocurrency futures markets, derivative platforms and other cryptocurrency investment vehicles. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies and other digital assets, inflating and making their market prices more volatile. As a result, they may be more likely to fluctuate in value due to changing investor confidence in future appreciation (or depreciation) in their market prices, which could adversely affect the value of your investment in tokens. It is important to note that most tokens are illiquid and no market exists for trading and may never develop.
Read All Investment Materials
Before making any investment, carefully read all the offering materials on BANQ including the risk factors. Make sure a token offering is suitable for your investment objectives.
The SEC has taken a cautionary approach towards cryptocurrencies and digital assets in general, and more specifically ICOs. In September 2017, the SEC created a new division known as the “Cyber Unit” to address, among other things, violations involving DLT and ICOs. In February 2018, both the SEC and CFTC further reiterated its concerns regarding cryptocurrencies in a written testimony to the Senate Banking, Housing and Urban Affairs Committee. On March 7, 2018, the SEC released a Statement on Potentially Unlawful Online Platforms for Trading Digital Assets, and reiterated that, if a platform “offers trading of digital assets that are securities” and “operates as an ‘exchange,’ as defined by the federal securities laws,” the platform must register with the SEC as a national securities exchange or be exempt from registration. The SEC’s statement serves as a notice to operators of any platforms, including secondary market trading platforms, that the SEC is actively monitoring for potentially fraudulent or manipulative behavior in the market for security tokens, as the SEC has cautioned recently for ICOs.
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The BANQ® Offerings are conducted under a registration or exemption. Below you will find the various types of offerings that may be posted on BANQ®.
The 2012 Jumpstart Our Business Startups (JOBS) Act established provisions that allow early‐stage companies to offer and sell securities to the public through a more streamlined and less burdensome process. Dubbed “Reg” A+, Title VI of the JOBS Act, took effect in June of 2015. Reg A+ offerings are sometimes referred to as ‘mini‐IPOs’ and follow a process similar to a traditional IPO. The securities issued in a Reg A+ offering are exempt securities under the Securities Act but the offering must be qualified in advance by the SEC before any sales can commence.
Another new exemption from registration created following the JOBS Act was the adoption by the SEC of new Rule 506(c). Similar to original Rule 506, which is now Rule 506(b), Rule 506(c) allows a company to sell an unlimited amount of securities to accredited investors. Under the new rule, however, companies may engage in general solicitation and advertising of its offerings, provided it undertakes to objectively verify the status of every investor in the offering as an accredited investor. Securities issued pursuant to Rule 506(c) are restricted securities under the Securities Act of 1933 and, as a result, cannot be sold or transferred in the absence of a registration statement being filed with the SEC or the availability of an exemption from such requirement, such as Rule 144.
Regulation S provides an exemption from the registration requirements of the Securities Act for offers and sales of securities that occur outside of the United States. Regulation S permits a U.S. company to issue securities to non-U.S. Persons in transactions outside of the U.S. without SEC registration. In order to comply with Regulation S the Company must establish that the investor is a non-U.S. person (as defined in the Rule) and that the transaction itself was consummated outside of the U.S.