India's Regulator Tells Companies to Sell Bitcoin Prior to IPOs: Report

By Shaurya Malwa

The Securities and Exchange Board of India (SEBI), the country’s top financial regulatory authority, is cracking down on high-level executives who hold Bitcoin and intend to take their companies public in the coming months, as per a report today on local news outlet Economic Times.

SEBI has asked promoters of such companies to sell off any cryptocurrencies they hold before raising funds from the public, the report said, adding that investment bankers and securities lawyers involved with any ongoing Initial Public Offering (IPO) process were already informed of the new regulation.

Among factors like cryptocurrencies remaining a legal gray area in India, a major concern for SEBI is that promoters could use the funds they raised through IPOs to buy more cryptocurrencies.

But not everyone is convinced of that argument.  "If a promoter holds any cryptocurrency, it may not necessarily expose the company to any risk,” Vatsal Gaur, partner at legal firm Pier Counsel, told the outlet. He added that holding cryptocurrencies was similar to owning any other financial asset—which doesn’t directly risk the operations of a listed entity.

The concerns come as the executives of some public companies in the US, most notably MicroStrategy CEO Michael Saylor, have championed a strategy of using company funds to buy Bitcoin.

The firm has already picked up over $1.5 billion of Bitcoin as part of its treasury and intends to buy over $900 million more in the coming days. Some say its stock has become a pseudo-Bitcoin ETF as a result of these purchases; the stock price has soared over 400% from under $150 to as much as $1,300 since its first Bitcoin purchase (a narrative that Saylor does not agree with).

Indian authorities, however, don't want a repeat of that in any stock listed in the country. Meanwhile, the India's central bank is already contemplating a ban on the ownership of Bitcoin or other cryptocurrencies, while simultaneously weighing the launch of its own digital currency.

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