SEC Highlights Risks in Stablecoin Issuer Circle’s IPO Bid: Report

The Securities and Exchange Commission (SEC) has raised several concerns about stablecoin issuer Circle ahead of its IPO.

One of the agency’s concerns was tied to inadequate disclosures related to its stablecoin USDC, Barron’s reported on June 18, citing documents obtained through a public records request.

Circle initially made an attempt to go public in 2021 through a special purpose acquisition company (SPAC) merger. But that plan failed. As of early this year, the company was in discussions with advisors, weighing a traditional IPO. “Becoming a US-listed public company has long been part of Circle’s strategic aspirations,” a Circle spokesperson said at the time.

USDC is currently the second largest stablecoin globally, with a market capitalization of $32.7b. While Circle hasn’t revealed its desired valuation for the IPO, its earlier SPAC merger attempt indicated a valuation of $9b.

Year-Long Scrutiny of Circle’s SPAC IPO Deal Revealed

Barron’s said it secured 155 pages of documents. These were related to the communication between the agency and Circle when the company tried to go public via a SPAC.

According to the outlet, the SEC and Circle exchanged messages for nearly a year, which is a longer time than usual. The SEC requested that Circle add disclosures about the potential risk of their token being classified as a security, and Circle complied.

Circle didn’t return Cryptonews’ request for comment by press time.

The possibility of USDC being classified as a security by the SEC casts a shadow over Circle’s IPO plans. While the exact consequences remain unclear, potential penalties and stricter regulations could be in store.

Circle might face fines and be forced to register as a broker-dealer, adding compliance burdens. Additionally, customers might be able to annul past USDC purchases, impacting the stablecoin’s stability.

Circle’s US Ambitions Hit by SEC Concerns

The SEC’s concerns extend beyond just USDC being a security. It is also questioning whether Circle itself should be classified as an “investment company,” subjecting it to stricter regulations.

This means Circle could face more SEC oversight, regular reporting requirements, and limitations on business activities compared to a typical operating company. Additionally, a security classification for USDC would introduce registration hurdles and potentially restrict transactions with certain businesses.

For years, companies like Circle and Tether, leaders in the stablecoin market, have insisted their products aren’t securities. To address this uncertainty, they’ve actively lobbied Congress for legislation that would clearly define how stablecoins are regulated.

Circle recently doubled down on its US ambitions. After filing plans for an IPO with the SEC in January, the company filed paperwork to relocate its legal headquarters from Ireland to the US last month. This suggests Circle is prioritizing the US market for both its upcoming IPO and its overall growth strategy.