Circle, a stablecoin issuer, has been the subject of numerous concerns from the Securities and Exchange Commission (SEC) in anticipation of its initial public offering (IPO).
Barron’s reported on June 18, citing documents obtained through a public records request, that the agency had concerns regarding the insufficient disclosures regarding its stablecoin USDC.
Circle initially attempted to go public in 2021 by merging with a special purpose acquisition company (SPAC). However, that strategy was unsuccessful. The company was in the process of engaging in discussions with advisors regarding a conventional IPO as of the beginning of the year. “Circle has long maintained its strategic objectives of becoming a publicly traded corporation in the United States,” stated a spokesperson for the company at the time.
According to market value, USDC is the second biggest stablecoin in the world right now, worth $32.7b. Circle has not disclosed its desired valuation for the IPO; however, its previous SPAC merger attempt suggested a valuation of $9 billion.
Barron’s reported that it had obtained 155 pages of documents. These were associated with the agency’s communication with Circle during the company’s attempt to go public through a SPAC.
The SEC and Circle exchanged messages for nearly a year, which is a longer period than is customary, according to the outlet. Circle complied with the SEC’s request to include disclosures regarding the prospective classification of their token as a security.
Circle did not respond to Cryptonews’ request for comment by the time of pressing. The potential classification of USDC as a security by the SEC casts a shadow over Circle’s IPO plans. Potential penalties and more stringent regulations may be forthcoming, although the precise repercussions are still uncertain.
Circle may be required to register as a broker-dealer and pay fines, which would increase its compliance obligations. Furthermore, consumers may have the ability to unwind previous USDC transactions, which could potentially undermine the stability of the stablecoin.
The SEC’s apprehensions have implications that extend beyond the mere fact that USDC is a security. It is also debating whether Circle should be classified as an “investment company,” which would subject it to more stringent regulations.
This implies that Circle may be subject to additional SEC oversight, regular reporting obligations, and restrictions on its business operations in comparison to a typical operating company. Additionally, a security classification for USDC would introduce registration obstacles and potentially restrict transactions with specific businesses.
The stablecoin market has been dominated by companies such as Circle and Tether, which have maintained that their products are not securities for years. In order to resolve this uncertainty, they have been advocating for legislation in Congress that would explicitly specify the regulatory framework for stablecoins.
Circle has recently doubled down on its ambitions in the United States. The company submitted documents to relocate its legal headquarters from Ireland to the United States last month, following its submission of plans for an IPO to the Securities and Exchange Commission (SEC) in January. This implies that Circle is prioritizing the US market for both its expected IPO and its overall growth strategy.
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