The Securities and Exchange Board of India, SEBI, recently communicated with the lawyers and bankers associated with the Initial Public Offering, IPO process. SEBI announced that the promoters of the company have to sell off their crypto assets before making a debut in the market.
Promoters to Sell Crypto Assets to be Eligible For an IPO
SEBI communicated with the merchant bankers and lawyers recently and asked the promoters to sell off their crypto holdings before applying for an IPO.
A prime securities lawyer, who is currently working on large initial public offerings said:
“There could be a direction from the government in this regard. The market regulator seems to think that this could become a risk for investors if a promoter holds an asset that is illegal in the country.”
There have been clarity issues on the legality of cryptocurrency in India for quite some time now. Every detail that has been communicated till now regarding the trading legality of crypto assets has been released informally. However, this step of restricting the crypto assets holders to file for an IPO to raise money has been taken because SEBI doesn’t want the money raised to be used in trading illegal assets.
SEBI Restricts Cryptocurrency Holders to File for Public Offering
The report said:
“In cases where companies are yet to file a draft red herring prospectus (DRHP) or promoters want to hold on to such assets, legal experts are said to have come up with a temporary solution — an affidavit stating they will sell any cryptocurrency they hold within 24 hours if the government bans it.”
Despite the fact that SEBI’s concern is legit, some promoters and crypto holders feel completely different and are against this regulation. Vatsal Gaur, a partner in Pier Counsel said that holding crypto assets and exposing the company to any risk are different aspects. He added:
“It is similar to holding any other financial assets which are free of risk to the operations of the listed company. It’s always possible to migrate the holding of a crypto asset overseas or to be transferred to an affiliate. Either way, it seems that the regulator is being over-cautious here and it appears like a case of overreach.”