Term Sheet — Friday, March 23

Mar 23, 2018

BLOCKCHAIN $$$

Good morning, Term Sheet readers.

Blockchain Capital, the oldest and most active venture capital firm dedicated to blockchain technology and the cryptocurrency ecosystem, raised $150 million for its fourth fund. The fund will invest in equity, as well as tokens, pre-sales, and cryptocurrency assets.

Blockchain Capital was formed in 2013, and its portfolio companies include Coinbase, Ripple, and Abra. You might remember the firm’s managing partner Bart Stephens from Term Sheet’s “5 Questions with a Dealmaker,” in which he said that Jamie Dimon should do some homework on Bitcoin before dismissing it as “a fraud.” (Read the full Q&A here.)

I caught up with Stephens yesterday to get more detail around the new fund and the cryptocurrency landscape as a whole. Here’s more from our conversation:

On Security Tokens:

One of the major topics of discussion in cryptocurrency at the moment is around the emergency of security tokens. Security tokens are are backed by real assets such as equity, LP shares, or commodities. They are also subject to federal security regulations.

Blockchain Capital conducted one of the first security token offerings last year when it raised capital for its third fund. “We’ve seen security tokens that will represent common stock  or real estate assets, for example,” Stephens said. “We think security tokens will be a huge growth margin in the coming years.”

On Cryptocurrency Regulation Part I:

The cryptocurrency market is still in its “Wild West” phase as regulators try to figure out how to proceed. Brett Redfearn, the head of the SEC’s trading and markets division, said yesterday that his key concerns around crypto include “fraud, market manipulation, theft, cybersecurity, terrorist financing and money laundering.”

Stephens told Term Sheet that there is still plenty of regulatory uncertainty when it comes to token issuance. “The SEC has told us a bunch of things that they don’t like, but what they haven’t really told market participants is what is allowable,” he said. “There’s a little bit of ongoing uncertainty, but it’s my hope that they are thoughtful and careful when making these decisions.”

On Cryptocurrency Regulation Part II:

A big part of the uncertainty comes from the fact that many regulatory agencies can’t decide exactly how to define (and in turn, regulate) cryptocurrencies such as Bitcoin. There’s been plenty of debate around whethey cryptocurrency assets are commodities, currencies or securities.

“To me, many of these crypto assets, and particularly Bitcoin, look like digital commodities. They have a utility function and a speculative function,” Stephens said.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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