On May 3, 2021, blockchain-based trading platform operator INX Ltd. announced it had completed its initial public offering of digital tokens, raising approximately $85 million in the IPO from over 7,200 institutional and retail investors. The INX IPO is the first SEC registered offering of digital tokens, and represents another major milestone for blockchain asset markets. At least two digital token offerings under Regulation A+ have previously been completed after being qualified by the SEC. And just three weeks before the INX digital token IPO, cryptocurrency exchange operator Coinbase Global, Inc. completed a direct listing, albeit of its common stock, not digital tokens.
In its prospectus included in its F-1 registration statement, INX stated it is focusing its business operations on two emerging blockchain asset classes: cryptocurrencies and security tokens.
A “cryptocurrency” is a digital representation of value that functions as a medium of exchange, a unit of account or a store of value. Cryptocurrencies are generally used a substitute for fiat currencies as a means of paying for goods or services or transferring value. Bitcoin and ether are examples of well-known cryptocurrencies. In its prospectus, INX stated emphatically that a cryptocurrency is not a “security” as that term is defined under the federal securities laws.
The INX prospectus defined a “security token” (a term not used by the SEC) as a blockchain asset that falls within the definition of a security under the federal securities laws. The SEC staff has acknowledged that determining whether a blockchain