SEC allows buying of stocks with crypto for first time

A Seattle-based company has taken a leap forward, that could transform the mainstream business use of cryptocurrency…

One company has taken a giant leap forward in terms of the US Securities and Exchange Commission (SEC), by accepting payment in crypto for stocks.

Pithia Inc is a venture capital fund based in Seattle. It recently made an investment in smart city developer DigitalTown. Nothing out of the ordinary there. But the way the stock buyout was made could transform the mainstream business use of cryptocurrency.

Pithia’s lawyer Tamara Rogers made a Schedule 13D filing to the SEC, listing cryptocurrency as the sole payment method for this investment. It’s understood this is the first time in history that this has happened.

Companies or individuals have to make 13D filings when they acquire or buy up more than 5% of any class of publicly traded securities in a public company. Keep “public company” in your mind. That’s the important bit.

DigitalTown was founded in 1982 and is a public company, with stocks traded on OTC Markets, a minor exchange.

As noted in the filing document, Catena Fund One are the buyers, and “the source and amount of funds used in purchasing the Common Stock is…1,050,000 RHOCs. RHOC are a form of cryptocurrency, valued at $1.16/RHOC at the time of transaction.”

This would make the investment worth $1,218,000. Crytpo is the only payment method and “No funds or other consideration were borrowed or obtained for the purpose of acquiring the Common Stock.”

RHOC is the cryptocurrency created by RChain, a blockchain ‘ecosystem’ of which Pithia is a part.

According to Coinmarketcap, as of 8 June 2018 RHOC is being traded at $1.35 US dollars, or 0.00017779 BTC. That gives it a market cap of $484,947,119. It’s ranked 37th out of 1651 cryptotokens in terms of trading volume.

Revolution or evolution?

Pithia claims to have “opened the door” to crypto investments in public companies. Tamara Rogers writes in a Medium post: “We filed this due to our recent investment in DigitalTown (OTC: DGTW), who is the very first public company to fully adopt blockchain and commit to RChain. They are also the first public company to accept a cryptocurrency in exchange for stock, let alone an altcoin instead of Bitcoin or Ethereum.

“This deal is truly the first of its kind — buying stocks with cryptocurrency is the first major change in this space in decades, if not centuries. We also demonstrated the importance of following all SEC guidelines. They’re not out to “get” the blockchain industry as some may have you believe. They’re here to create a level playing field for all parties and protect both investors and enterprises.”

Is this move as revolutionary as it sounds?

Cryptocurrency trader and investor Cameron Brownlee thinks it sends a strong message to potential institutional and business clients.

He told “The SEC are effectively endorsing cryptocurrencies as a valid medium of exchange, essentially giving the go-ahead for purchases of a greater scale.

“It is noteworthy that the relatively unknown RHOC was approved for this transaction, as RHOC occupies a significantly smaller share of the cryptocurrency market than its much bigger siblings Bitcoin and Ethereum; encompassing less than 0.2 percent of the overall cryptocurrency market capitalisation.

“Similarly, the approval of a cryptocurrency in the acquisition of stocks and the apparent discretion required in RHOC’s instance leaves one to wonder just how big of a purchase the SEC will approve, including which cryptocurrencies meet the requirements, and to what extent this barrage of publicity can be used as a springboard towards mainstream adoption.”

So, the SEC is open to consider cryptocurrency use on a case-by-case basis.

This allows for major shifts to occur, driven only by innovative companies willing to be open and transparent with their operations and, as Rogers notes, to “[follow] all SEC guidelines”.

Image: BigStock