The Financial Industry Regulatory Authority (FINRA) has given crypto startup Circle an ATS license.
Circle Is in Good “Shape”
The license is for the company’s new “Seed Invest” crowdfunding platform, which has approval from the U.S. markets regulatory organization to serve as an “alternative trading system.” The license will allow Seed Invest an opportunity to trade equities on the secondary market, and companies will have access to new ways of garnering the capital they need.
In a statement, the company says:
Circle’s broader mission is to empower people and businesses to more easily share and create value globally. A significant part of that mission is opening the ways that entrepreneurs and startups can raise capital directly on the internet from a broad base of both accredited and unaccredited investors, but a critical missing piece in private capital markets has been the lack of exchanges and marketplaces for secondary market trading and liquidity of private securities.
Up to this stage, one of the primary ways for cryptocurrency companies to earn money and funding was through initial coin offerings (ICOs). The process involved a company requesting capital funds from investors that would then gain access to the company’s unique cryptocurrency, which they could then use to pay for the company’s goods and services.
The process gained lots of traction in the crypto space, but as of late, ICOs have garnered something of a shady reputation. Many companies have either skipped out on their investors, taking the money and running, or simply didn’t raise enough to stay in business very long. As a result, these companies disappear with the funds they’ve earned while investors are stuck with a coin that’s virtually useless to them.
Overall, it is estimated that at least $500 million has been stolen by phony or fraudulent ICOs.
Individuals and companies that utilize Seed Invest can trade their startup shares on the secondary market as soon as they earn their initial funds. Seed Invest is the first platform designed for equity crowdfunding in the U.S. that has received approval from FINRA to engage in secondary securities trading.
A New Way to Raise Money
Continuing its statement, Circle explains:
The past couple of years have witnessed an explosion in experiments in private capital formation and secondary liquidity, with blockchain-powered digital assets becoming a major new category of assets and technology systems for markets. We believe we are in the early stages of a much broader transformation of global capital markets, and that we will see mature, internet-based markets emerge that give companies ranging anywhere from the seed to growth stages more ways to raise capital, as well as a much broader base of investors access to invest in those companies while also having opportunities to trade those assets through regulated marketplaces.