INX Ltd. has entered the home stretch for its $130 million initial public offering (IPO), potentially the largest registered securities sale by a company in the blockchain sector.
The cryptocurrency and security token exchange startup is targeting an April launch date for the IPO, people familiar with the situation said. INX is about to kick off a series of presentations to potential investors, known as a roadshow, which was originally supposed to start in January, the sources said. The firm has hired a European investment bank to act as lead underwriter for the IPO, they said.
INX is positioning itself as a mature, dutifully compliant exchange eschewing the “beg forgiveness, don’t ask permission” practices that have defined the crypto industry for most of its history. Unlike the initial coin offerings (ICO) that claimed exemptions from securities laws by arguing their tokens weren’t investments or by selling only to wealthy investors, INX is registering with the SEC so it can solicit the general public. The process has taken the company two years.
Doubling down on compliance, the company plans to relocate its headquarters from the blockchain-friendly jurisdiction of Gibraltar to New York, INX disclosed in its prospectus, which was updated on Monday. That means it will have to obtain a state BitLicense to serve residents, and it is in talks with the New York Department of Financial Services (NYDFS) to obtain one, the people familiar with the situation said.
This is the regulatory equivalent of transferring from a community college to MIT. Only about 20 BitLicenses have been granted since the New York Department of Financial Services (NYDFS) finalized its regulation in 2015, although regulatory sources said the agency has assembled a team to expedite applications. Exchanges including Kraken and ShapeShift stopped doing business in New York, calling the license’s requirements onerous, and NYDFS recently began to reassess its rules.
In December, the deadline passed for the U.S.Securities and Exchange Commission (SEC) to register objections to INX’s prospectus, filed over the summer. With no comments received from the SEC, the company was free to proceed with the offering, which will be sold in the form of tokens on the Ethereum blockchain.
Cast of characters
The proceeds from the IPO would fund the launch of a crypto exchange, known as INX Digital, and security token platform, INX Securities. In preparation, INX has lined up several partners.
For example, INX has tapped Anchorage and BitGo to custody digital assets on behalf of the exchange’s clients, people familiar with the exchange said. Anchorage confirmed its involvement, and INX named BitGo in an SEC filing.
Further, Tokensoft is providing design and tech advisory services and Quantstamp will audit the exchange’s smart contract code, according to the filing.
INX’s token would be listed on its own security token platform and on other exchanges, according to the sources.
Holders of INX’s tokens would get a share of the company’s profits and stand in line ahead of equity investors for repayment in the event of bankruptcy; the tokens would also be accepted as payment for trading fees.
Meantime, INX has obtained money transmitter licenses in eight U.S. states so its crypto exchange will be allowed to handle fiat on-ramp and crypto-to-crypto transactions, the filing said.
The exchange would initially list the top 10 coins by market capitalization and add other coins and derivatives later, according to the filing.