Major crypto firms are exploring public offerings, but many aren't sold on tokenization

Some of the biggest names in the crypto and blockchain industry are plotting their way toward public offerings – but it's a mixed picture on whether they'll go the traditional IPO route or pursue more experimental, technologically-driven approaches. 

Just last week Ripple chief executive officer Brad Garlinghouse said he expects a number of cryptocurrency companies to go public in the next 12 months – adding that his firm would also IPO in the near-term.

While a spokeswoman declined to offer specifics on Ripple's plans, Garlinghouse's remarks illustrate a clear undercurrent that is emerging in the crypto market. 

Coinbase – arguably the poster child for cryptocurrency trading in the U.S. – will likely IPO at some point in the future, according to sources. In 2018, Coinbase's then-chief operating officer Asiff Hirji told Bloomberg News that there wouldn't be an IPO "any time soon" but he kept the door open to such a move all the same.

"We have so much to do. I mean, at some point yes, we will go public, but that's not even close to the top of the list of things we are worried about," Hirji said. 

In the same vein, Coinbase CEO Brian Armstrong said at TechCrunch Disrupt in 2018 said that he'd "love to run a public company."

One former employee told The Block going public "wasn't even on the radar screen," adding that a plan is now in place. A spokeswoman for Coinbase did not respond to an email seeking comment.

As for Bitmain and eToro, it is also a question of when, not if.

Bitmain, the bitcoin mining hardware giant, revived its initial public offering plans in July 2019, as reported by Bloomberg. Originally, it was looking to list its shares in Hong Kong, but its application lapsed in March 2019. 

The company is taking steps to reduce expenses by eliminating business lines that have been less successful, including artificial intelligence development, and shaving its headcount. It is possible the firm might opt for a public listing in the U.S. similarly to rival Canaan, which likely did so in a bid to improve its brand in the eyes of investors.

Still, one analyst told The Block that regulatory hang-ups could impede Bitmain. 

"Bitmain is a sticky situation [in my opinion]," the person said. "I think many people are doubting these guys make it past regulators."

As for crypto broker eToro, a spokesperson declined to comment specifically on its plans, but sources say an IPO is being considered and could happen in the next three to five years. 

"We are always looking at how eToro can evolve either with further funding rounds or a potential IPO," a spokesperson said in a statement. 

IPO bound

Elsewhere, other firms have outlined a more clear path for their respective public market debuts. 

In Stockholm, cryptocurrency exchange BTCX could conduct a public offering before the end of Q3 2020, as CoinDesk previously reported. 

CipherTrace, the blockchain analytics firm, is planning to raise "up to several hundred million" in a U.S. listing. CEO John Jefferies told The Block's Yogita Khatri that the IPO would occur after 2020.

Bitcoin Suisse, which has raised more than $55 million CHF, plans to raise 40 million CHF in a public sales this year in Switzerland, a spokesman confirmed to The Block.

Meanwhile, London-based crypto wallet firm Blockchain could list its shares on a U.S.-based exchange as soon as 2023, the firm's chief executive officer Peter Smith told The Block. 

“We’re in crypto for the long-term," Smith said. "Part of that is establishing trust in not just our company but the market itself. Crypto needs great companies, and we aim to stand right beside giants like JPM Morgan, Google, and PayPal in the market.”

To that end, Blockchain has taken steps to diversify its revenue streams, launching new exchange and lending businesses in 2019.

As reported by The Block's Aislinn Keely, Blockchain's chief financial officer, Macrina Kgil, says the firm has worked to improve transparency in its corporate governance. 

What about tokenization?

Interestingly, a number of these firms will likely conduct traditional initial public offerings rather than a tokenized version. 

To date, few noteworthy companies have opted public sales on so-called security token platforms, despite the supposed benefits. Advocates say tokenization promises better liquidity and more transparency.

Blockchain's Smith, for instance, told The Block the firm would opt for a traditional offering. Bitmain has been planning for a traditional offering as well. 

The same goes for BTCX, which told CoinDesk "a listing of the company via a traditional route" would "bring bitcoin to the masses and bridge the gap between new and traditional finance."

Recent crypto firms to come to market have also opted for traditional offerings, including Canaan and Silvergate, which saw their market debut on Nasdaq and NYSE, respectively, in 2019. 

There are some exceptions. Bitcoin Suisse is leaving all options on the table, according to co-CEO Niklas Nikolajsen. 

"Private placement/STO (token), IPO — all options are in play," he said in a statement. 

INX, a crypto token exchange, is building out a venue for tokenized securities and will issue its own token that will hold similar properties to preferred shares. As reported by CoinDesk, the firm filed a draft F-1 outlining its plans to raise up to $129.5 million through the deal. 

Richard Johnson, founder of security token startup Texture, told The Block that it's a bit ironic that a crypto firm wouldn't consider a token offering, but noted that it makes sense in light of the lack of institutional money in the market for tokenized public securities. 

"If they need to raise money from institutional investors then they need to go where they are," he said. 

He said tokenization offers more transparency for issuers. 

"It provides companies with more accurate information about their shareholders," he said. "If you own shares of General Electronic via Charles Schwab, then GE sees that as an ownership by Charles Schwab."

"With public digital securities the company would know exactly who its shareholders are," Johnson added.

Matt Yamamoto contributed reporting and analysis.