McDermott Will & Emery advised on the first SEC-registered coin offering (INX)
International law firm McDermott Will & Emery represented INX Limited in its IPO of up to 130 million INX Tokens at a purchase price of USD 0.90 per Token. INX intends to utilize the proceeds from the offering to establish platforms for the trading of cryptocurrencies and security tokens.
INX consummated an initial closing in mid-September after receiving purchase commitments that exceeded the offering minimum. This is the first public offering of blockchain assets registered under the Securities Act of 1933.
“This offering represents a bold step forward, not just for INX but for the larger blockchain community,” said Mark Selinger. “Our client had both the foresight and the patience to pursue a registered offering. By working with U.S. regulators, our client has pushed past the next boundary toward widespread adoption of blockchain assets both by retail investors and mainstream financial institutions.
We know that others have looked at doing registered security tokens, but to our knowledge there are no other similar non-confidential security tokens filings out there yet. I believe we will see several within the next few months.”
What were the complex obstacles you needed to overcome?
Mark added: “The offering raised novel U.S. securities law issues relating to the registration of the INX Token, which is a hybrid security with several complex features. The most complex obstacles included fully understanding the complexities of the U.S. regulatory landscape. The current regulations do not fit well with what blockchain is trying to accomplish. The U.S. system relies on middlemen and intermediaries like transfer agents, custodians, and other third parties to essentially manage the securities offering and trading network. Blockchain creates a means to eliminate the middleman. That creates a lot of friction.”
Three years in the making, what did you need to get this deal across the line?
“To get such a deal across the line demanded patience as we are bringing not just a new product, but in fact a new industry, to the market. You need to give people time to get their heads around the concepts, the terminology, and what we structuring to achieve. The key is to find analogies to current products that people understand, and to say “we’re pretty much like that.”
The McDermott Capital Markets Practice assisted INX in navigating the offering through the SEC, including multiple conversations with senior members of the SEC Staff.
In the current climate, how has the cryptocurrency or the fintech sector more generally been impacted by the pandemic?
Mark pointed out: “Like many things during 2020, such as the adoption of digital health, insurtech and similar solutions, I think we’ve seen an accelerated willingness to adopt, or at least consider, fintech solutions that were considered too outside of the mainstream even a year ago.
The recent PayPal announcements regarding cryptocurrency was, I’m sure, in the works for a long time, but I think that the 2020 mindset accelerated their decision.”
The migration toward digital payments does continue to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers.
On October 21, PayPal announced the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account.
