Circle blames SEC for failed plan to go public

Stablecoin issuer Circle blamed the U.S. Securities and Exchange Commission (SEC) for its failed public-listing plan, Financial Times reported on Jan. 25.

The USDC issuer said the financial regulator failed to approve its S-4 registration before the expiration of its $9 billion special purpose acquisition company (SPAC) deal. The S-4 registration allows companies to offer new shares upon approval by the SEC.

A person familiar with the matter told FT that Circle lost a lot of time between when it intended to go public in 2021 and when the deal elapsed in 2022. During this period, crypto companies had to deal with heightened regulatory uncertainty in the U.S.

The source added that the FTX collapse likely further exacerbated the situation in November 2022, as it highlighted  how badly some crypto companies were being run and made it “impossible for anyone to approve anything.”

Circle initially announced plans to go public at a $4.5 billion valuation in July 2021 — a renegotiation of the deal in 2022 saw the firm’s valuation shoot to $9 billion.

Circle expected ‘thorough’ and ‘rigorous’ review process

According to the FT report, Circle expected the SEC to have a “thorough, rigorous review process” considering its business’ swift growth over the period. Circle reportedly said:

“We never expected the SEC registration process to be quick and easy.”

Circle’s CEO, Jeremy Allaire, previously shared a similar view. Allaire tweeted on Dec. 5, 2022, that the SEC had been “rigorous and thorough” in understanding his firm’s business and the many novel aspects of the crypto industry. Allaire added:

“This kind of review is necessary to ultimately provide trust, transparency and accountability for major companies in crypto.”

Circle also poured cold water on the notion that the deal was derailed because of the volatile market conditions that saw cryptocurrencies trade at record lows in 2022.

SEC intensifies scrutiny of crypto firms

A separate Wall Street Journal report said the financial regulator had intensified its scrutiny of crypto firms that wants to go public over the past year.

Crypto firms like Circle, alongside others like eToro and Bullish, reportedly failed to get the SEC’s approval. The Gary Gensler-led commission has issued repeated questions to another crypto company — Galaxy Digital — that intends to go public on Nasdaq.

According to the report, the regulator’s rigorous review focuses on the company’s financial disclosures, legal risks, and the impact of market disruption.