BDO’s Six Critical Success Factors for Going Public as a Digital Assets Company

As favorable regulatory changes drive investor interest in digital assets, more companies are choosing to go public, with many initial public offerings (IPOs) on the horizon.  

But while the digital assets industry is significantly maturing, the process of taking a company public can still be challenging. Digital asset companies face unique and complex regulatory, operational, and technical challenges, such as establishing accurate valuation and custody frameworks for digital tokens or meeting stringent disclosure requirements under Securities and Exchange Commission (SEC) oversight. Before going public, digital asset company leaders must address their governance, risk management, and cybersecurity controls among other areas of the business. 

Read on to learn more about the six critical factors leaders should consider when navigating an IPO.

1. Preparing Financial Statement Reporting 

Financial reporting for public companies is vastly different from how many private digital asset companies typically report on financial information. Accelerated timelines under SEC reporting requirements means companies need to adhere to quarterly filings and stringent year-end deadlines as opposed to engaging with auditors on an annual, or sometimes longer, basis. 

External auditors assess public companies under stricter SEC and Public Company Accounting Oversight Board (PCAOB) requirements. SEC filings also introduce expanded disclosure requirements, including segment reporting, earnings per share (EPS) calculations, detailed revenue disclosures, and comprehensive sections such as Management’s Discussion and Analysis (MD&A), all of which demand diligent internal processes for accurate reporting. 

Due to the higher degree of technical accounting complexity, in-house expertise is critical for digital asset companies. Leaders should consider hiring accounting teams or working with third-party advisors who can navigate novel applications of accounting rules for cryptocurrency and other digital assets. Reporting teams must be adept and efficient in managing the complex compliance requirements associated with taking a company public.

2. Enhancing Internal Controls

As a company scales, so must the sophistication of its internal controls and systems design. Digital asset companies are frequently young, hyper-paced, and rapidly growing. In many cases, these companies do not prioritize internal controls and systems, yet they are critical to help safeguard assets and demonstrate compliance to investors, auditors, and stakeholders before going public. 

When a company goes public, there is also heightened regulatory scrutiny on their internal controls. The most significant requirements stem from the Sarbanes-Oxley Act of 2002 (SOX), specifically Section 404, which includes two key components: 

• 404(a), which requires management’s assessment of the internal control environment; and
• 404(b), which mandates an external auditor’s opinion on the company’s internal controls over financial reporting. 

Because auditors issue public opinion on company controls, digital asset executives must address and enhance their control environment to avoid the identification of material weaknesses. A material weakness not only negatively impacts reputation, but it can also trigger remediation and the need for additional testing.

3. Understanding Compliance and Corporate Governance

Though digital asset companies are different than traditional financial institutions, they often must uphold the same compliance standards. These standards include establishing Know Your Client (KYC) controls, Anti-Money Laundering (AML) processes, and other regulatory requirements that protect customers and their assets. Comprehensive compliance policies that cover areas such as insider trading, investor relations, and whistleblowers are also expected. 

Digital asset companies will likely also face a variety of boardroom requirements when going public. The New York Stock Exchange (NYSE) and NASDAQ require companies to have specific board structures, including independent directors as well as audit and compensation committees. 

For SEC filing requirements, digital asset companies can expect heightened corporate governance expectations — such as proxy statements, Form 4 filings, and Form 8-K disclosures. 

Supporting all of these compliance processes often requires software solutions to manage obligations effectively and strengthen regulatory reporting and auditing processes. Digital asset companies that invest early in integrated compliance and governance systems can better demonstrate their maturity to public markets and streamline SEC readiness.

4. Building the Data Foundation 

Data readiness and building a strong data foundation are vital success factors for any digital asset company preparing for an IPO. From setting data standards to codifying data governance, how a company organizes and manages its data plays an essential role in regulatory compliance and financial reporting. 

Digital asset companies operate in a highly dynamic environment defined by complicated transition flows, decentralized systems, and cryptographic security. To meet these obligations, data must be complete, accurate, accessible, and auditable at all times. This is essential not only for valuation purposes and investor confidence, but also for meeting emerging regulatory requirements specific to digital asset companies. 

For a successful IPO and smoother transaction process, these companies must demonstrate mastery of their own data. High-quality data enables more sophisticated financial modeling, risk assessment, and performance metrics that articulate a company’s true market value. Poor data quality, on the other hand, can increase audit costs and undermine credibility. 

To get ahead, digital assets companies should work to establish a single source of truth, consolidating data from trading platforms, blockchain networks, custody systems, and financial ledgers. By harmonizing and consolidating data structure, the company can produce reliable financial statements and demonstrate operational integrity to investors and auditors — all of which are crucial for a successful IPO. 

5. Enhancing the Firm’s Cybersecurity Posture

Strong cybersecurity defenses are particularly important in this industry since all transactions, assets, and wallets are stored digitally.  Weak cybersecurity controls can lead to severe consequences and regulatory scrutiny in this area is intensifying. 

The SEC’s rules require public companies to file an 8-K once a cybersecurity incident becomes material to a registrant’s operations. Beyond assigning greater responsibility to boards and CISOs, these rules compress the timeline for reporting, requiring Form 8-K disclosure within four business days of determining a breach is material. For digital asset companies operating in a 24/7 trading environment, this short window can present a challenge when trying to assess materiality in real time. Also consider that the impact of a breach incident can fluctuate with token valuations.

For digital asset companies going public, the result is a new level of urgency around governance, incident response, and investor communications. The shortened timeline for reporting incidents demands a proactive, structured approach to avoid non-compliance and mitigate costly repercussions. Consider establishing the following pillars when building a robust cybersecurity compliance program: 

1. Risk assessment
2. Policies & procedures 
3. Governance & oversight
4. Testing & improvement
5. Whistleblower & reporting mechanism 
6. Regulatory engagement
7. Third-party oversight 
8. Training & awareness

6. Prioritizing Talent & Culture

Finally, when preparing for an IPO, digital asset companies must prioritize attracting and retaining top talent to stay ahead of trends and technology changes happening in the cryptocurrency space. Hiring professionals with highly specialized skills across tokenization, blockchain, and cybersecurity will be critical to keeping pace in an industry that evolves at lightning speed. 

When looking to recruit top talent, companies should specifically focus on compensation and culture. As executive compensation becomes public in SEC filings, an IPO can open the door to poaching during a critical moment for a digital assets company. To mitigate this risk and meet employee demands, it’s imperative that company leaders structure salaries in line with industry benchmarks. A comprehensive compensation study can help with this effort. Some digital asset companies are also providing stock award plans that can help encourage and align incentives with a company’s long-term goals. 

Beyond compensation, company culture — fueled by a clear mission and collaborative passion — can drive better retention rates in the digital assets industry. Leadership should work carefully to cultivate a strong culture that can withstand post-IPO changes, as investor demands, accelerated growth, or even focusing on stock prices can sometimes strain the culture that led to the initial success of the company.