The US SEC has raised concerns about the status of Circle’s USDC stablecoin as the company seeks to launch a multi-billion dollar initial public offering (IPO), Barron’s reported on June 18.
The SEC’s concerns primarily stem from risks associated with USDC and other stablecoins that could potentially be classified as securities under US law. The watchdog expressed similar concerns in 2021 when Circle attempted to IPO through a special purpose acquisition company (SPAC).
According to the report, the documents reveal a nearly year-long exchange between the SEC’s Division of Corporate Finance and Circle.
The company is said to have cleared most of the hurdles in the IPO process despite significant concerns from watchdogs. However, it is still unclear whether the application will be approved or not.
SEC concerns
The SEC has asked Circle to disclose the risks associated with USDC if it were to be classified as a security under US law and the potential implications of being an investment company. Circle complies with SEC disclosure requirements but declined to comment on ongoing discussions.
Investment companies, such as mutual funds, are subject to strict oversight by the SEC, including regular reporting and operational restrictions. If USDC is classified as a security, Circle will face increased costs and regulatory requirements, which will impact the company’s business model.
Circle first attempted an IPO in 2021 through a SPAC merger with Concord Acquisition Corp., which valued the deal at $9 billion. However, the plan was canceled in December 2022.
The SEC raised similar concerns at the time, including whether Circle should register as an investment firm and whether its tokens could be considered securities, requiring further disclosure and compliance measures.
The company quietly filed for an IPO in January, hoping to follow the traditional IPO route. However, the SEC’s previous concerns persist as the agency requires the company to disclose details about the risks associated with USDC being classified as a security.
USDC could benefit the most from MiCA
Analytics company Kaiko Research said Circle’s USDC will profit significantly from the upcoming EU Markets for Digital Assets (MiCA) regulations, which will be implemented in July
Kaiko analyst Anastasia Melachrinos emphasized that USDC could take market share from its larger competitor, Tether’s USDT, especially as traders use the stablecoin to move digital assets between exchanges or to store assets amid fluctuating token prices.
The regulatory change has affected major cryptocurrency exchanges. OKX has limited trading support for USDT in the European Union, although users can still deposit, withdraw, perform OTC trades, and exchange USDT for euros. Similarly, Kraken is considering plans that could include delisting USDT in accordance with new EU regulations.
“Certainly Kraken and OKX will delist all EURO/USDT pairs,” Melachrinos noted.
MiCA will be fully deployed in early 2025, with the European Banking Authority overseeing stablecoin regulations.
Itadori
Bitcoin Magazine
