Reddit’s stash of bitcoin (BTC), ether (ETH), and Polygon’s (MATIC) might not be a game-changer in terms of quantity, but its attitude toward crypto carries weight.
The platform recently revealed its crypto holdings as part of its treasury and payment strategy in preparation for its U.S. public listing. This move isn’t surprising considering Reddit’s early dabbling with crypto tokens, NFTs, and blockchain tools during the pandemic-fueled bull market, making it one of the few Web2 giants to take crypto seriously.
What’s intriguing are Reddit’s views on the crypto landscape, as outlined in its SEC filing. Notably, Reddit declared its ownership of both BTC and ETH, deviating from the “bitcoin-only” approach adopted by many companies. This decision, explained in detail in its S-1 filing, highlights Reddit’s confidence in Ethereum, influenced by regulatory insights suggesting ETH isn’t likely to be considered a security.
Though Reddit’s compliance team added a disclaimer acknowledging their risk-based evaluations, this stance is significant given the ongoing debate over ETH’s legal status post its transition to proof-of-stake. Additionally, Reddit acknowledges the risks associated with crypto, such as the potential loss of private keys and regulatory constraints on accessing or selling assets.
Regulations are already shaping Reddit’s crypto strategy, notably the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), which mandates stringent safeguards for user-held crypto. While Reddit’s non-custodial approach exempts it from this rule, it sheds light on the challenges of key management at scale. Moreover, generally accepted accounting principles (GAAP) dictate how Reddit accounts for crypto, with rules favoring recognizing losses over gains—a factor that may deter firms from crypto investments.
Despite these hurdles, Reddit sees promise in crypto, evident even in its cautious S-1 filing. The document reflects broader corporate sentiments toward blockchain, acknowledging its potential amidst legal uncertainties and consumer demand. While crypto’s widespread adoption on Reddit remains uncertain, the platform’s product and engineering teams continue to explore its possibilities, indicating ongoing experimentation in the crypto space.
