Regulatory climate forces companies to reconsider crypto IPOs

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Crypto prices are rebounding to start 2023, perhaps giving rise to a thaw in the crypto winters, but there is still one corner of the market that is freezing: initial public offerings (IPOs) by crypto-related companies. cryptocurrency universe.

Increased scrutiny of crypto companies by the Securities and Exchange Commission (SEC) is preventing various crypto companies from accessing public stock exchanges. This is a big deal because in order to list on the Nasdaq or the New York Stock Exchange (NYSE), companies must first receive the SEC’s seal of approval.

The recent collapse of FTX and the ensuing contagion on the crypto space are among the reasons the SEC is tightening regulatory scrutiny of private crypto firms aspiring to go public.

The SEC hasn’t sought to stop the companies from going public, according to a person familiar with the matter, but crypto firms believe the pace of agency scrutiny has hurt their efforts, especially after the crash. a well-known cryptocurrency and the failure of a major crypto hedge fund that hit many exchanges and lenders. The bankruptcy of crypto exchange FTX and a bear market in digital asset prices could keep the door closed, The Wall Street Journal reported.

Currently, the universe of US-listed companies with direct crypto exposure is relatively small and largely made up of bitcoin miners themselves, an asset class under siege after last year’s declines. by the largest digital currency.

Take the case of the VanEck Digital Assets Mining ETF (DAM). DAM, which tracks the MVIS Global Digital Assets Mining Index, owns just 20 stocks. Other crypto-correlated exchange-traded funds extend beyond bitcoin miners to take positions in companies such as Block (NYSE:SQ) and PayPal (NASDAQ:PYPL). Some even own shares of old guard companies such as Mastercard (NYSE: MA) and Visa (NYSE: V). However, these companies have diverse business models and are not dependent on crypto.

Emulating these approaches is easier said than done, but crypto-related businesses seeking Nasdaq or NYSE listings may consider less reliance on crypto in an effort to curry favor with regulators.

The agency still has leverage when companies want access to government contracts. SEC accountants and attorneys ask questions of potential securities issuers about financial information, legal risks, the impact of market disruption and other topics. The SEC says it checks disclosures only to make sure they provide investors with the information required by law, according to the Journal.

For more news, insights and analysis, visit the Crypto Channel.

Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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