Tron Inc Rebrands SRM Entertainment, Adopts TRX as Reserve Asset

Tron, the blockchain platform founded by Justin Sun, is set to challenge traditional corporate asset management strategies by adopting its native cryptocurrency, TRX, as a reserve asset. On June 16, toy maker SRM Entertainment announced its rebranding to Tron Inc, backed by a $100 million private investment, which could rise to $210 million if warrants are fully exercised. Sun will serve as an adviser to the new entity.

This move, widely recognized as a reverse merger, positions TRX as a corporate reserve asset, a strategy that differs significantly from the more widely accepted use of Bitcoin (BTC) in corporate treasuries. While Bitcoin has gained traction on public balance sheets, TRX is less traded, centrally controlled, and closely tied to the company itself, making it a riskier asset for corporate reserves.

Tron’s strategy is part of a broader trend where companies are increasingly adopting cryptocurrencies as part of their treasury plans. However, the shine on this strategy is wearing off, as announcing a crypto treasury plan is no longer a guaranteed path to a soaring stock price. Companies like Trident Digital Tech, which announced an XRP treasury plan, saw their shares fall shortly after the announcement.

Justin d’Anethan, head of sales at a token launch and distribution platform, highlighted the risks associated with newer crypto treasury strategies, noting that while they may not necessarily fail, there is an implied higher risk compared to more established strategies. Tron’s plan stands out because it involves holding its own blockchain’s native token as a corporate reserve, a move that could create a feedback loop where a drop in TRX value could further tank Tron Inc’s perceived value.

TRX, despite being one of the largest cryptocurrencies by market capitalization, lacks the institutional demand and trading volume of Bitcoin. As of June 17, TRX recorded a 24-hour trading volume of just $1.75 billion, far below Bitcoin’s $34.3 billion. However, Tron boasts one of the most active ecosystems in the industry, playing a major role in stablecoin flows and having the largest circulation footprint of Tether’s USDt (USDT) in the world.

Tron’s stablecoin flows have been tied to illicit finance, but the network has made efforts to curb abuse. The involvement of politically connected individuals, such as Eric Trump, in tech enterprises is not unprecedented and can lead to scrutiny regarding the impartiality and independence of tech firms. Eric Trump has denied any public involvement with Sun’s new venture but has a connection to Dominari Securities, the broker-dealer serving as the exclusive placement agent for the deal.

Tron’s announcement comes after Circle’s successful public debut through an initial public offering. Circle’s USDC stablecoin is the seventh-largest cryptocurrency by market cap, ranking one position ahead of TRX. Brisov calls Circle’s approach more transparent compared to the SRM deal, noting that blockchain companies usually prefer more transparent paths to public offerings to reassure potential investors.

The Tron deal has been described as a reverse merger, a shortcut to the stock market that allows private companies to go public by taking over an existing listed entity. In the 2000s, numerous companies from China used this method to list on US exchanges, but several later faced allegations of financial misconduct, prompting increased regulatory scrutiny and delistings. The Securities and Exchange Commission tightened its reverse listing rules in 2011 following a wave of China-based firms entering US markets.

The SEC and Tron also have unfinished business, as the agency alleges that Sun and his companies sold unregistered securities through TRX and BitTorrent (BTT). This raises questions about compliance with securities regulations. If TRX is deemed a security, Tron Inc could face additional regulatory obligations. In February, the market watchdog asked a US federal court to pause its case against Sun and his companies.