India's Securities Regulator Wants IPO Promoters to Sell Crypto Holdings: Report

India's top securities regulator reportedly wants initial public offering (IPO) promoters to divest themselves of any holdings of cryptocurrencies before their companies consider filing for public listings.

According to a Monday report from the Economic Times, the Securities and Exchange Board of India (SEBI) has been informally communicating the message with merchant bankers, lawyers and company executives over several weeks.

No written communication has been formally provided by SEBI, however, several people close to the matter told the Economic Times the communications could be related to India's planned restrictions on non-state-issued cryptocurrencies.

India is said to be moving to ban the use of "private cryptocurrencies" with a new bill set to be introduced in the current parliamentary session. The bill is also expected to provide a framework for the Reserve Bank of India to issue its own digital rupee.

"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,” said a securities lawyer in the report.

See also: India Grants Crypto Holders Reprieve Ahead of Likely Ban: Report

Mahesh Singhi, managing director of investment banking firm, Singhi Advisors, said the fear is that the funds raised could be used for speculation.

"The regulator had been giving indirect messages on this and in certain cases even other investors are cautious when it comes to promoters holding crypto assets as these could be banned in India," said Mahesh.

Having cryptocurrency holdings is a "red flag" that would need to be mentioned in an IPO prospectus, he added.