A more welcoming regulatory environment should smooth the way for some crypto firms to go public, but experts caution that not every successful crypto firm is a good candidate for an IPO.
The election of Donald Trump could help usher in a surge of crypto firms going public.
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Posted November 12, 2024 at 7:39 am EST.
At the 2024 Bitcoin Conference in July, Donald Trump promised to make the US the “crypto capital of the planet” and fire current SEC Chairman Gary Gensler—one of crypto’s harshest critics—on his first day in office. Now that Trump is set to become the country’s 47th president following last week’s decisive victory, many in the crypto community are predicting a shift in the regulatory environment that could spawn multiple initial public offerings (IPOs) in an industry that Gensler recently described as brimming with “a lot of fraudsters.”
“I think you’re going to see the IPO market open up,” said Ram Ahluwalia, CEO of investment advisory firm Lumida Wealth, on a recent episode of the Bits + Bips podcast. In particular, Ahlulwalia mentioned stablecoin issuer Circle as a company he expected to go public soon, and blockchain analysis firm Chainalysis as another possibility.
Circle, whose flagship product is the $37 billion market cap stablecoin UDSC, filed for an IPO with the SEC in January, and the regulator is currently reviewing the filing. Jeremy Allaire, the company’s CEO, has long maintained his desire for Circle to become a publicly-traded company. In 2022, Circle attempted to go public via a special purpose acquisition company (SPAC) named Concord Acquisition Corp. at a valuation of $9 billion. However, the deal went sour amid the challenges of a sluggish crypto winter that was exacerbated by the collapse of FTX, with Concord stating it was ultimately unable to “consummate a business combination.” Circle’s valuation has subsequently tumbled to roughly $5 billion.
Circle did not respond to Unchained’s request for comment for this story but Allaire recently told Bloomberg that “we are very committed to the path” of going public, and that the company was financially strong enough to not require any additional funding.
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Meanwhile, Ahluwalia and other experts noted that analytics firm Chainalysis could have strong IPO prospects given that it’s less dependent on crypto prices to be profitable. The company, which was valued at $8.6 billion in 2022, declined to comment on these IPO rumors, with Maddie Kennedy, Chainalysis’ vice president of communications, telling Unchained that “right now, our priority is to build and ship the best blockchain analysis products to our customers and provide the best service in the industry.”
Meanwhile, other crypto firms that are rumored to be IPO candidates in the next year or two include crypto exchange Kraken, custody provider Fireblocks, and trading platform eToro.
IPOs Aren’t For Every Company
Despite a more generally pro-crypto administration and the likelihood of a more crypto-friendly SEC chair, other experts told Unchained to not necessarily expect a deluge of crypto IPOs in the coming months. That’s because many digital assets are inherently risky and volatile, two undesirable qualities in an IPO candidate.
“You want to be able to have a company that has less volatility,” said Quynh Ho, the head of venture capital and corporate development for GSR, a crypto investment firm and liquidity provider. Ho was previously an investment banker for nearly a decade and so is intimately familiar with the IPO process.
“An IPO is not an easy thing to do, and it’s not suitable for every single business,” she added, noting that companies must be comfortable bearing “the burden of being public” and “the costs that come with it.”
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The process requires that a company demonstrate stable profitability over several years as well as potential for continued growth. There are also numerous regulatory filings that must be made on a regular basis, and the company’s executives must face questions from analysts on quarterly calls.
Baker & McKenzie lawyer Karl Egbert told Unchained that while a more crypto-friendly SEC would reduce the regulatory risk faced by some crypto firms, other factors such as weeding out fraud and other illegal activity in their ecosystems may be just as significant for improving their IPO prospects.
“For some of those companies that are living with regulatory risk, I think that [risk is] going to be dramatically reduced,” Egbert said, referring to firms that are either facing SEC enforcement actions or at risk of such actions.
“Removing that regulatory risk, I think, will make it easier for at least some of the more traditional crypto infrastructure companies to be able to contemplate an IPO,” Egbert explained. “But I wouldn’t be surprised that there’s still some work to be done. Particularly…at the product level.”
Ho noted that crypto market infrastructure and analytics companies are good IPO candidates because of their greater stability, mentioning names such as crypto asset platform Anchorage Digital and bitcoin financial services firm NYDIG. Anchorage Digital was valued at about $3 billion as of March 2023, according to Forbes, while NYDIG was valued at around $7 billion in 2021, according to Reuters.
Neither Anchorage Digital nor NYDIG responded to requests for comment for this story.
