IPO promoters ordered by India’s Sebi to sell their cryptocurrencies

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 India has been among the countries that are still deliberating on a ban on cryptocurrencies. Recently, the Indian Securities and Exchange Board [SEBI] noted issues with promoters holding crypto and asked them to sell it before raising capital through an initial public offering [IPO].

According to sources, Sebi told brokers, securities lawyers and company executives involved in the IPO phase of this decision.

According to a prime securities lawyer working on large IPOs:

“There could be a direction from the government in this regard. 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.”

There has been a lack of clarification regarding the proposed ban on cryptocurrencies for years, and whatever has been shared has been done informally. Sebi’s key concern is that funds collected by IPOs should not be used for the purchase and sale of illicit properties.

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According to reports:

“In cases where companies are yet to file a draft red herring prospectus (DRHP) or promoters want to hold on to such assets, legal experts are said to have come up with a temporary solution — an affidavit stating they will sell any cryptocurrency they hold within 24 hours if the government bans it.”

Despite the concern about the funds raised through the IPO, many believed that keeping crypto should not be a red flag. According to Vatsal Gaur, Pier Counsel’s partner, crypto holding does not inherently expose the company to any danger. It is equivalent to the keeping of every other financial assets free of risk to the activities of the listed firm.

Gaur further added:

“…it’s always possible to migrate the holding of a crypto asset overseas, or to be transferred to an affiliate. Either way, it seems that the regulator is being over cautious here and it appears like a case of overreach.”

Bitcoin’s price hit new heights and the latest peak was observed at $57k. Although some other countries are trying to control the sector, India is likely to follow Nigeria’s measures if a ban is declared. With increased awareness and interest, India is likely to face further difficulty in banning cryptocurrencies if it follows that path.

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