The U.S. Securities and Exchange Commission (SEC) just made crowdfunding easier for crypto startups. It has raised the limit on registering for crowdfunding offerings from $1.07 million to $5 million. Also, the move will enable crypto firms to access funding sources beyond the traditional venture capital route.
Anyone Can Invest in a Securities-Based Crowdfunding Offering
According to the SEC press release, the new amendment “will promote capital formation and expand investment opportunities while preserving or improving important investor protections.”
The amendment passed on a 3-2 vote. Chairman Jay Clayton and Commissioners Hester Peirce and Elad Roisman voted in favor while commissioners Allison Herren Lee and Caroline Crenshaw opposed the ruling.
The new ruling will now enable companies the eligibility for receiving securities offerings without necessarily being registered with the SEC. Now, any startups can ask for non-accredited investors for investments.
According to the SEC, “anyone can invest in a securities-based crowdfunding offering.” Although, non-accredited investors are limited to a certain amount based on their total net worth and annual income to calculate the limit of investment. However, with the new ruling today, accredited investors no longer need to have any limits.
Crypto Startups Can Diversify their Investor Base
The new SEC amendment will directly impact the crypto industry, some of which depend on agencies for token sales and other funding sources.
Gabriel Shapiro, a partner at BSV Law with expertise in securities law, told Decrypt that the recent SEC amendments signify that crypto companies don’t need to raise fundings from VC firms.
“I think it’s great for startups to be able to diversify their investor base,” he says. However, he also believes that the new SEC amendment isn’t going to completely change how his firm operates, adding:
“We may push some of our token projects to raise via crowdfunding more if it makes sense for them as the limit gives them more incentives to go through the process.”