Sebi wants promoters to sell their cryptocurrency before IPO, says report

Updated : February 22, 2021 10:23 PM IST

The government is looking to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

People with knowledge of the subject believe that the regulator is foreseeing the possibility of the government banning cryptocurrency that is not state-issued.

Sebi wants promoters to sell all their cryptocurrency before raising funds for their companies through an IPO, reported The Economic Times. As per the report, several people with direct knowledge of the matter procession of cryptocurrency could now hinder the fundraising attempts of promoters.

According to the report, Sebi had already communicated this to merchant bankers, securities lawyers and even company executives involved with the IPO process. While no response came from the part of Sebi, people with knowledge of the subject believe that the regulator is foreseeing the possibility of the government banning cryptocurrency that is not state-issued.

“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,” a top securities lawyer currently working on some of the largest IPOs was quoted as saying in the report.

Sebi’s move-- which comes in form of informal communication—comes as the government is looking to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

However, some legal experts argue that the regulator’s stand may not be justified. "If a promoter holds any cryptocurrency, it may not necessarily expose the company to any risk — the same way as holding any other financial assets doesn't pose a risk to the operations of a listed entity…Further, 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," Vatsal Gaur, partner, Pier Counsel, was quoted as saying in the report.

Sebi wants promoters to sell their cryptocurrency before IPO, says report

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