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Cryptocurrencies and Accredited Investors

Posted by , on Aug, 2019

A central distinction in cryptocurrency is the difference between tokens and coins. All cryptocurrencies must fall into one of these two categories. Coins are different from tokens because coins include their own blockchain, unlike tokens. Let’s review some important cryptocurrency accredited investor issues. Most of the popular cyrptocurrencies such as Ethereum, Bitcoin, and Ripple are identified as coins and utilize the blockchain technology. That means coins work within a peer-to-peer decentralized network in which a digital ledger records transactions. Differences Between Security and Utility Tokens It is especially important for investors and cryptocurrency companies to understand the differences between the two different types of cryptocurrency . The Security and Exchange Commission (SEC) has more stringent regulations for security tokens (which are considered digital securities) than for utility tokens. An utility token allows you to trade or purchase on a cryptocurrency exchange without having cryptocurrency accredited investor status, whereas you aren’t allowed to do so for a security token. Generally speaking, a utility token gives investors access to a product or service. Security tokens are similar to securities in that they represent part ownership in a real asset that is tradeable and exists outside of the blockchain. These kinds of tokens are regulated by the SEC, just like traditional securities. You must be an accredited investor to participate in security token offerings (STOs). Why the Differences Between Cryptocurrency Types Matter It is important for prospective cryptocurrency accredited investors to understand the value of the cryptocurrency they have under consideration, and how any applicable SEC regulations will affect that value. Utility and security tokens represent two different possible pathways in the development of cryptocurrency. These are: cryptocurrency as a payment method and as tokenized securities. This raises a few important questions: Will the stock market and/or U.S. dollar be replaced by cryptocurrency? What other issues will affect the cryptocurrency investor along the way? Time will tell, but in the meantime cryptocurrency companies are making considerable progress and developing innovative applications using both approaches. Be the first to...

506(c), Crowdfunding, and the Differences Between the Two...

Posted by , on Nov, 2018

Crowdfunding and 506(c) offerings can be thought of as closely related to each other. Both tools make it easier for businesses to access a diverse array of investors. In addition, both take advantage of the potential of burgeoning technologies to raise capital quickly and at a reasonable price. 506(c), crowdfunding, and the differences between them is reviewed below. The important differences between the two investing avenues include the fact that a 506(c) offering poses fewer restrictions than crowdfunding. The flip side to this advantage involveswho is permitted to invest – crowdfunding hasfewer restrictions then a 506(c). Investors When it comes to investors and who can invest, crowdfunding provides a flexible opportunity. Crowdfunding venture opportunities can accept financial support from non-accredited investors. Offerings under 506(c) can only be made by accredited investors. In addition, Rule 506(c) investors must meet the qualifications of an accredited investor. Businesses can utilize a third-party service to make this verification or perform the accreditation and in-house, with the associated risks. One problem is that investors can be reluctant to offer their sensitive financial information to a business which they are interested in infusing capital. Therefore, utilizing a third-party investor verification service can be the most reliable and safest way to fulfill the verification requirement. Advertising Is it concerns advertising and 506(c), crowdfunding, and other differences, it is important to note that crowdfunding solicitation is a more restrictive device than 506(c) offerings. The rules are more restrictive for crowdfunding and general advertising is severely limited. A funding portal must be utilized to perform primary disclosure – this funding portal is a crowdfunding website. Capital Raising Limits When it comes to raising capital, 506(c) offerings have zero limits on the amount of capital raised. However, crowdfunding has considerable limitations. Those attempting to raise capital through crowdfunding are restricted to a $1 million maximum offering yearly under Regulation CF. Some businesses that require a significant amount of upfront capital may find this limitation too restrictive. Many factors come need to be weighed when considering 506(c), crowdfunding, and the differences between the two. If you are looking to verify potential investors, contact an experienced investor verification service that can help you efficiently move the verification process forward. Be the first to like. Like...

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