United States Property Coin (USP) is a security token, which is defined as a digital asset that represents ownership or other rights and transfers value from an asset or bundle of assets to a digital token. Security tokens are the digital form of traditional investments like stocks, bonds, or other securitized assets.
We have already written a guide explaining what security tokens are, how they work, 5 common myths and misconceptions about security tokens, and how they are similar to (and different from) a stablecoin. But the guide you are reading right now exists for one reason alone: to help you understand how to buy USP, and what regulations and exemptions you are subject to.
Security tokens work by representing ownership of an underlying asset, in our case, a real estate portfolio. USP is therefore an asset-backed security token. The value of the token is backed by the value of the real estate portfolio that it represents.
As a digital security, offerings of USP are subject to federal securities regulations. This means USP must comply with all applicable regulations and operate under specific guidelines, and always strive for complete and total regulatory compliance (which is something we are making every possible effort to achieve). Navigating these regulations can be confusing, but we’re here to help you understand how to buy USP and under what specific exemptions you are able to purchase USP tokens.
Understanding SEC Regulations & Exemptions
Essentially, there are two ways that security token issuers (us) are able to issue an STO (a Security Token Offering, which is similar to an ICO):
- Become SEC-registered, or;
- Operate under a specific SEC exemption, enabling them to issue the security token without SEC registration.
We have chosen to operate under a set of specific exemptions. The two exemptions that we currently operate under are:
- Regulation D, Rule 506(c);
- Regulation S.
By operating under these two exemptions, we are able to sell USP to both accredited U.S. investors, and non-accredited foreign investors.
Note: We expect to achieve Reg A compliance within the next 12 months.
Regulation D (506c) – Accredited Investors Living In The U.S.
Often abbreviated as Reg D, Regulation D is a set of rules that governs the private placement of securities.
In order to be operate under Regulation D, token holders must meet a few conditions. In order to buy USP under the Reg D exemption, you must meet one of these three requirements:
- Exceed an annual personal income of $200,000 USD;
- Exceed a joint annual income (with your spouse) of $300,000 USD;
- Exceed a net worth of $1,000,000 USD (excluding your personal residence).
Additionally, once these requirements are met, you must hold one of the below accreditations, cementing your status as an accredited investor that is covered under Reg D:
If you meet one of the three above requirements but do not currently hold one of the above accreditations, then you must either get accredited, or see if you qualify under the next exemption…
Regulation S – Individuals Outside Of The U.S.
If you are not a U.S. citizen, then you can purchase USP under the Regulation S exemption. This exemption enables issuers to sell securities to non-U.S. citizens without having to register the security with the SEC. Additionally, if you are covered under Reg S, then there is no income or net worth requirement – meaning that anyone outside of the US, regardless of their financial status, can buy USP and participate in the US real estate investing revolution.
The only downside to buying USP under the Reg S exemption is that tokens cannot be re-sold to individuals within the U.S. for a lockdown period of 12 months.
After 12 months, USP tokens can be freely traded and re-sold.
Why such heavy regulation?
The Securities and Exchange Commission is tasked with protecting investors from fraud, and ensuring that only qualified individuals are able to invest in securities. By subjecting securities to such heavy regulation, the SEC is doing their due diligence to make sure that only investors who fully understand the risks involved are able to purchase USP. This protects both investors and the issuers of the securities they are investing in.
Without these types of regulations, it would be far too easy for scammers and fraudsters to take advantage of unsuspecting investors.
By ensuring that only accredited and/or qualified individuals are able to participate in offerings of USP, the SEC is helping to create a safe and secure environment for investing.
Steps USP Is Taking To Protect Its Investors
In order to protect our investors, USP is making every possible effort to operate well-within the exemptions laid out in Regulations D and S, including integrating hard requirements within the USP Investor Portal (launching late November 2022) to ensure that only qualified individuals can purchase USP.
Read this article to learn more about the specific steps USP is taking to protect investors.
If you have any additional questions about USP or the regulations that it is subject to, please don’t hesitate to reach out to us. We would be more than happy to chat with you and answer any questions that you may have.
