Crypto companies seeking to go public over the past year have faced increased scrutiny from the Securities and Exchange Commission, as financial distress and failures spread across the volatile industry, the Wall Street Journal reported. Crypto-focused companies including Bullish Global, Circle Internet Financial and eToro Group Ltd. have failed to secure the SEC approvals that are required of companies going public. The firms were seeking stock-exchange listings through mergers with special-purpose acquisition companies, an alternative path to going public that thrived in 2020 and 2021 before heightened regulatory checks and market turbulence ended the SPAC boom. Another crypto broker, Galaxy Digital Holdings Ltd., GLXY 3.75%increase; green up pointing triangle has faced repeated rounds of questions from SEC staff about its business since filing paperwork to go public on the Nasdaq Stock Market, according to people familiar with the questioning. Galaxy, which isn’t using a SPAC structure, announced in March 2021 that it wanted to become a U.S.-listed public company and hoped to clear SEC review by the end of that year. The SEC didn’t set out to stop the companies from going public, but crypto firms believe the pace of the agency’s review hurt their efforts, particularly after the crash of a well-known cryptocurrency and the failure of a large crypto hedge fund that hit many exchanges and lenders. The bankruptcy of crypto exchange FTX and a bear market in digital asset prices may keep the door closed. Most crypto firms say their digital assets aren’t securities, and therefore they don’t need to comply with investor-protection rules. SEC Chair Gary Gensler disagrees and contends that much of the industry is noncompliant.
