A New Era of Token Fundraising: A Milestone for Compliant Fundraising in the United States

Author: Cookie

Monad's recent on-chain event on Coinbase has become a hot topic this week. In addition to discussions about whether participating in the sale at a $2.5 billion FDV is worthwhile, as a new asset issuance project launched by Coinbase, its "compliance level" has also sparked widespread discussion and is considered a landmark event for compliance in the crypto industry.

Stablecoin USDC issuer Circle mentioned in its recent Q3 financial report that it is exploring the possibility of issuing native tokens on Arc Network. After nearly two years, Coinbase also stated in an interview this October, through Base chain co-founder Jesse Pollak, that it will launch a Base token. All signs indicate that asset issuance in the crypto industry is entering a new era of compliance.

Coinbase's First-Ever Asset Issuance: What Has Monad Disclosed?

To advance Coinbase's first-ever asset issuance, Monad Foundation's subsidiary MF Services (BVI), Ltd. provided an 18-page disclosure document. This document clarifies Monad's legal structure, financing details, and market-making plans, and includes an 8-page investment risk warning. Compared to the past, this represents significant progress in terms of disclosure.

On the legal structure level, Monad clarified the following:

- The seller of Monad tokens is MF Services (BVI) Ltd., a subsidiary of Monad Foundation, with Monad Foundation as the sole director of the company

- Monad's three co-founders are Keone Hon, James Hunsaker, and Eunice Giarta. The core contributors to Monad are Monad Foundation and Category Labs.

- Category Labs is headquartered in New York, USA, and is responsible for Monad's technical development. James Hunsaker is the Chief Executive Officer of Category Labs

- Monad Foundation is a non-member Cayman Islands foundation responsible for community engagement, business development, developer and user education, and marketing services. Keone Hon and Eunice Giarta are the co-general managers of Monad Foundation. The foundation is overseen by a board of directors, including Petrus Basson, Keone Hon, and Marc Piano

These legal structure disclosures provide investors with stronger protection mechanisms, enhancing accountability and legal recourse for investors.

On the financing details level, Monad clarified the following:

- Pre-seed financing: Raised $19.6 million, conducted from June to December 2022

- Seed round financing: Raised $22.6 million, conducted from January to March 2024

- Series A financing: Raised $220.5 million, conducted from March to August 2024

- In 2024, Monad Foundation received a $90 million donation from Category Labs to cover operating costs before the public launch of the Monad network. This donation is intended for Monad Foundation's expected expenditures through 2026 and is part of the $262 million raised by Monad Labs in its various financing rounds

The disclosure of financing details avoids the fabrication of financing and resulting misvaluation that has often occurred with past crypto projects.

On the market-making plan level, Monad clarified the following:

- MF Services (BVI) Ltd. has signed loan agreements with five market makers: CyantArb, Auros, Galaxy, GSR, and Wintermute, lending a total of 160 million MON tokens. Among them, Wintermute's loan term is one year, while the others are for one month and can be renewed monthly

- Monitoring by third-party experts (Coinwatch) to verify the use of lent tokens, including idle balances of CyantArb, Auros, Galaxy, and GSR

- MF Services (BVI) Ltd. may also deploy up to 0.20% of the initial MON token supply as initial liquidity in one or more decentralized exchange (DEX) pools

- Tokens in market maker loans and initial liquidity are included in the ecosystem development allocation section of the tokenomics

This is the first time a crypto project has disclosed such specific market-making plans so transparently before TGE. Combined with all the above, this is also the first time we have seen the transparency of asset issuance in the crypto industry approach that of traditional markets.

The Difficult Journey of Asset Issuance Compliance

In 2017, Ethereum emerged, and ERC-20 brought a wave of asset fundraising, leading to a surge in projects and the industry's first boom. But in that same year, July 2017, the SEC issued its first guidance on this model. At the time, the SEC announced that any new cryptocurrency sold to investors seeking profit and issued by a centralized company would be considered a security and must comply with securities regulations.

According to this guidance, related issuance activities in the US after this time were likely to violate securities regulations and risk SEC lawsuits. Since the guidance was published, several cases have been announced. According to the SEC's 2018 annual report, in that year alone, among dozens of investigations involving asset issuance and digital assets, "many were still ongoing in fiscal year 2018."

In November 2018, the SEC issued its first civil penalties for asset issuance without proper securities registration. Projects Paragon (PRG) and Airfox (AIR) were each fined $250,000. In addition, they were required to register their tokens as securities and submit periodic reports.

In June 2019, Canadian social media company Kik Interactive faced a lawsuit from the SEC over asset issuance. To fight the SEC, Kik also established a new fund called crypto.org to raise enough funds for its legal defense.

The two largest issuances in crypto history, EOS's $4.2 billion and Telegram's $1.7 billion, both became entangled in legal disputes with the SEC. Block.one paid a $24 million fine to settle with the SEC, while Telegram reached a $1.24 billion settlement over the Gram token issuance by its subsidiary TON Issuer. The $1.24 billion Telegram settlement included $1.22 billion in disgorgement and $18.5 million in civil penalties.

Celebrities and KOLs have also been sued by the SEC for issues related to token issuance. John McAfee, founder of the famous antivirus software McAfee, was sued for failing to disclose income from promoting assets, and crypto KOL Ian Balina was sued for participating in the promotion of unregistered crypto issuances.

On July 10, 2019, the SEC approved blockchain company Blockstack PBC's Reg A+ secondary offering, the first such issuance compliant with securities law. Another project, Props, also received approval from the US Securities and Exchange Commission (SEC) in July of that year. However, two years later, Props announced plans to cease issuing its Props token under the SEC's Reg A+ after December 2021 and to discontinue support for the Props Loyalty program. At the time, Props stated that it had determined it could not maintain or further develop the Props Loyalty program within the existing securities regulatory framework. Due to the lack of relevant, authorized domestic trading platforms, such as Alternative Trading Systems (ATS), US holders of Props tokens were restricted from trading their Props tokens, and similar factors hindered Props' development.

For a long time, this model has been plagued by compliance issues, and thus, after the frenzy of 2017, it was gradually replaced by VC investment, exchange IEOs, and retrospective airdrops. Therefore, Coinbase's move to bring back asset issuance is not seen by the market as a simple "nostalgia," but rather as a "return" of asset issuance in a brand-new form after years of compliance advancement, in a fundamentally new market structure.

The Return of Asset Issuance

On November 12, Bitwise CIO Matt Hougan stated that Coinbase's newly launched Launchpad marks the strong return of crypto-based capital formation. Compliant asset issuance is expected to become a core theme in 2026 and reshape the financing model for startups, becoming the fourth pillar of crypto's disruption of traditional finance. The previous three pillars are: bitcoin's reshaping of gold, stablecoins' reshaping of the US dollar, and tokenization's reshaping of trading and settlement.

Matt Hougan said that early asset issuance experiments proved that blockchain technology can connect entrepreneurs and investors faster and at lower cost than traditional IPOs, even if previous booms failed. The key difference this time is regulation and structure. Current US Securities and Exchange Commission (SEC) chairman Paul Atkins (who co-chaired the crypto advocacy group Token Alliance supporting asset issuance and serves on the board of tokenization company Securitize) has recently called for new rules and safe harbor mechanisms to support compliant issuance, and Coinbase's new platform is the first major practice in this direction.

By 2025, asset issuance already accounts for about one-fifth of all token sale volume, whereas two years ago this share was negligible. Platforms such as Echo, Kraken Launch, and Buidlpad not only adapt to current compliance requirements, but compared to the rough mechanisms or simple gas wars of the past, have made great progress in self-custody, multi-chain issuance support, and access channel control. We have already seen very successful cases like Plasma and Falcon Finance on these platforms.

The return of asset issuance is a manifestation of the crypto market bearing fruit after years of compliance exploration. We will see more and more serious cases like Monad, and retail investors will receive better protection. As mentioned at the beginning of the article, projects like Arc from Circle and Base from Coinbase, which were previously considered unlikely to issue tokens, are now sending new signals in the current mature compliance environment.

We are entering a new era.