Indian Regulator Asking IPO Promoters to Divest Crypto Holdings

The Securities and Exchange Board of India, the country’s top securities market regulator and popularly known as SEBI, is quietly asking the local initial public offering (IPO) promoters to liquidate their cryptocurrency investments.

As reported by the local daily The Economic Times on Monday, the regulator informally communicated over several weeks with merchant bankers, securities lawyers, and even company executives, who are involved with the IPO process.

Though there is no official circular banning any market participants from divesting their crypto investments, many experts believe that this is in connection with the country’s upcoming cryptocurrency ban.

“There could be a direction from the government in this regard,” a securities lawyer told the publication. “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.”

Banning Cryptos

India is approaching a ban on digital currencies as the country’s finance minister confirmed that all cryptocurrencies, except those issued by central banks, will be deemed illegal. A bill titled ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ will be introduced in the ongoing parliamentary session, which is scheduled to end on April 8.

But SEBI’s decision to approach the promoters is odd and not entirely justified.

“If a promoter holds any cryptocurrency, it may not necessarily expose the company to any risk — the same way as holding any other financial assets doesn’t pose a risk to the operations of a listed entity,” Pier Counsel partner, Vatsal Gaur, said.

“Further, 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.”

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