Crypto SPACs Enter The Ecosystem

Cryptocurrencies have reached the ecosystem of digital payments and finance. Through a small IPO, $200 million has been raised by Crypto 1, with this capital, the company plans to strengthen its presence in the crypto market and expand its offerings in that market.

Following the creation of its first Special Purpose Acquisition Company (SPAC), Crypto 1, one of the venture capital firms and asset managers in the cryptos-based industry, was able to raise a total of $200 million through an initial pre-sale campaign (IPO).

Developed by SPACs International, Inc., an entity that went public in 2019 and operates as a registered public company, Crypto 1 raised these funds through its recently launched IPO.

This article by CoinDesk reveals that the company SPAC is raising funds through IPOs. The IPOs are designed for institutional investors and retailers to purchase the company’s stocks.

Some SPACs have the potential to reach millions of dollars in capital, but their definition and their regulatory status are very similar to that of investment funds. In this sense, a SPAC is “an emerging corporate entity that is formed for the purposes of raising capital from investors, which will be used for a specific purpose”.

What is a SPAC?

To better understand the implications of this, it is convenient to first review the idea of a SPAC, which would qualify as a newly created entity made up of a group of investors, who appear under the role of “Sponsors”.

The SPAC is a portfolio of private companies, which are assessing their future potential to become publicly traded companies.

It is important to note that the SPAC has no permanent capital.

For the SPAC to operate, it must raise money from its sponsors, which are groups of individuals who have invested in the SPAC. This money is put into the SPAC, which is managed by a General Partner, who must be a market maker or a large Investment Bank.

According to information published by the CoinDesk news portal, in this case, the sponsors would raise funds for the company SPAC through an initial public offering (IPO), with which the entity markets its shares publicly among institutional investors and retailers.

Crypto 1’s case

Concerning Crypto 1, SPAC, a Florida-based firm, filed a registration statement with the Securities and Exchange Commission seeking to generate approximately $200 million via the issuance of 20 million shares at a price of $10 apiece.

Crypto 1 intends to invest cash in cryptocurrency projects and platforms for the exchange of digital currencies, as well as payment systems and/or linked financial services enterprises primarily in Asia, Europe, North America, and Latin America.

A seasoned team

The following executives make up the Crypto 1 team:

Najamul Kidwai, founder and president, has over 30 years of expertise in product creation, company development, and technology investment.

Michael Zhao, co-founder, and CEO have expertise in cryptocurrency trading and founding firms in the field.

David Hytha is the Chief Financial Officer. He has over 35 years of expertise in new product development, startup development, and financial management for technology-related firms.

For the time being, it remains to be seen what the company’s next move will be, and if this business model will have even more ramifications inside the digital currency ecosystem.

With regards to the share sale, the Crypto 1 team said that everything was done in compliance with existing legislation, and with regards to the firms it intends to support, it added:

“We have not identified or established any viable targets for the company merger… Neither has anybody linked with us made such a statement nor has it been expressed directly or indirectly… While there are no territorial constraints or prohibitions on the [crypto] business, we will avoid pursuing objectives that are linked with or developed in both China and Hong Kong.”