The recent 6 Feb report of Cameron and Winklevoss-backed, NY-headquartered crypto exchange Gemini considering an IPO in 2025 has once again put the limelight on the deliberations surrounding the ‘centralised crypto exchanges (CEXs) going public’. The positive scenario of crypto exchanges going public first caught significant public attention after one of the major crypto exchanges, Coinbase, went public via direct listing on April 14, 2021. The crypto world witnessed the spectacular financial market performance of Coinbase’s listing, right on the first day – with its stock (COIN) reaching as high as $429 -though it fell after it due to market volatility. The unprecedented surge in Coinbase’s user acquisition – reaching 110 mn in Q4 2022 from just 68 mn in Q2 2021 – further compliments the benefits accrued to Coinbase after it.
The milestone set out by Coinbase in the crypto industry had opened up the queue to follow ups with other exchanges – recent being Gemini – considering a similar option.
How and Why should a Crypto Exchange like Gemini go public?
Per se, a crypto exchange going public follows the same practice similar to that followed by traditional companies. Though presented with tough regulatory compliances, it can go public via three ways – IPO, Direct Listing and Special Purpose Acquisition Company (SPAC) – in which an exchange merges with a pre-listed shell company in order to avoid the traditional IPO process.
The traditional benefits by going public remains the same for crypto exchanges too. Since exchanges usually rely on transaction fees as their major source of revenue, the substantial amount of funds that they raise in the process of going public can be utilised for further expansion, making acquisitions and technology upgrades in their institutional infrastructure. It also opens up the door for those investors who do not directly want to invest in crypto but can then do so by trading in the exchange’s stock. Furthermore, if it is on Wall Street, the gap between traditional and decentralized world bridges.
With the crypto market growth booming and set to accelerate further as we witness the change in tides of US administration, the time to talk about going public and making the ultimate decision couldn’t be more suitable. Bitcoin (BTC) has achieved an ATH of $108,000 and more countries are looking forward to the approval of Exchange-Traded Funds (ETFs) on the line of US Securities and Exchange Commission (SEC). The stimulus received from the US election can be gauged by the fact that Coinbase Global has witnessed a 65% rise in its stock price since the election. A report by Barron’s in fact predicted that 2025 can be the year of crypto IPOs. It quoted Alex Thorn, head of research at Galaxy Digital who predicted that “A shift at the SEC on digital assets could lead to an explosion of public offerings and a dramatic expansion of the crypto equities landscape”. And taking the IPO step can further enhance the integration of the traditional and crypto world while also bolstering the credibility of the exchange itself.
Prediction #4: 2025 will be the “Year of the Crypto IPO,” with at least five crypto unicorns going public in the U.S.
The past few years have been quiet on the crypto IPO front. But we expect a stampede of crypto IPOs in 2025.
Here are five likely candidates: pic.twitter.com/1H5BSn0MXL
— Ryan Rasmussen (@RasterlyRock) December 11, 2024
How do crypto exchange users benefit from it?
Not only the exchange, but the crypto investors and users also benefit from it. As publicly listed exchanges have to disclose financial statements mandatorily, it increases trust and transparency for the users. The regularly reported quarterly earnings provide greater insights to the users. They also face less risk of sudden collapse in comparison to private exchanges.
Exchanges gone public and considering IPOs further
Apart from the above mentioned crypto exchange, Coinbase, many other crypto exchanges have gone public in the past:
- OSL, became one of the first exchanges to receive approval from Hong Kong’s Securities and Futures Commision in August 2023.
- By a reverse takeover, HTX (Huobi) – Seychelles based crypto exchange – went for public listing in August 2018.
- Coincheck, debuted on Nasdaq on Dec. 11 last year, making it the first Japanese crypto firm to go public on an international exchange.
- eToro has also filed for a US IPO with valuation worth $5 Billion, with planning listing date in 2025.
- Kraken, one of the oldest Cryptocurrency exchanges, is also considering an IPO this year, according to reports, after it has been delaying its initial plans since 2021.
- Recently, Bullish Global, Peter Thief-backed crypto exchange has also disclosed that it is in talks with Jefferies Financial Global Inc. for a 2025 IPO.
- Circle, popular issuer of the USDC stablecoin has also confidentially filed for US IPO – highlighting the growing trend and surge.
Final Thoughts
Certain challenges do remain for the crypto exchanges considering IPOs. Regulatory uncertainty coupled with strict securities’ law compliance can make the process more complex for crypto projects counterpart to their traditional companies. Strict Anti-Money Laundering (AML) and alignment with International Financial Reporting Standards (IFRS) is also required to be followed. Moreover, an analysis research firm by 10x Research further stated that crypto firms planning an IPO can fuel the BTC rally – driving its price to All time Highs!
Nonetheless, the aftermath benefits crypto exchanges by tackling challenges and regulated compliance are non-negotiable.
The post Gemini to go Public! Should other Crypto Exchanges follow? appeared first on CoinGape.
