The SEC approved the registration statement (see here) of INX Solutions Limited ("INX"), a Gibraltar company that intends to go into the business of providing markets for the trading of digital assets, the securities of which are represented by "INX Tokens."

INX's offering document stated that it expects to establish three exchanges; two in the United States and one in Gibraltar. One of the U.S. markets will trade only cryptocurrencies that are not securities; to do so, it will seek to obtain a license as a money transmitter. The second U.S. market is intended to trade securities that are represented as digital assets; it will be registered with the SEC as a broker-dealer and an alternative trading system. The third market will be based and regulated in Gibraltar.

Commentary

The SEC's approval of this offering does nothing to resolve any legal uncertainty as to the regulatory treatment of digital assets.

The registration statement asserts that the instruments being offered are securities and does not suggest that there is any material likelihood that they will be transformed into a non-security. The registrant concedes that there are already numerous other platforms that offer trading in cryptocurrencies. Likewise, there are many other broker-dealers that can provide trading in securities that are represented in digital form, subject to the operational difficulties unique to the trading, settlement and custody of such assets. The registration statement indicates that the issuer has developed or will develop a particularly good product in this regard, but ultimately that will be something for market participants to decide. The fact that the issuer has itself sold securities in digital form is likely not the feature that will distinguish any INX market from its competitors.

While the law as to digital assets may be unclear, the prospectus itself is clearly written and straightforward, and includes the caution that "Purchasing INX Tokens involves a high degree of risk."

Primary Sources

  1. PR Newswire Press Release: INX Limited Announces Effectiveness of Security Token IPO
  2. SEC Notice of Effectiveness: INX Ltd
  3. SEC Prospectus: INX Ltd

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