SEC Junks Grayscale’s Filecoin Trust Application Over ‘Security’ Label

Christian Encila

2 years ago

3 mins read

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Filecoin, a decentralized storage platform based on blockchain technology, has recently found itself entangled in a regulatory debate as the United States Securities and Exchange Commission (SEC) raises concerns over its classification as a security.

Grayscale Investments, a prominent digital asset management firm, has been instructed by the SEC to withdraw its application for a Filecoin Trust, citing potential securities implications.

Grayscale’s intent to launch an updated Filecoin Trust product was initially disclosed through a Form 10 application submitted to the SEC on April 14. However, in a recent announcement, Grayscale revealed that the regulatory body has expressed reservations about Filecoin’s categorization, asserting that it could fall under the definition of a security.

Grayscale Pushes Back Against SEC Filecoin Securities Claim

Grayscale has revealed that it received a comment letter from the SEC on May 16. In the letter, the regulatory body cautioned that Filecoin (FIL), the underlying asset of Grayscale’s proposed Filecoin Trust, meets the criteria for being classified as a security under federal law. As a result, the SEC requested that Grayscale withdraw its application for the trust product.

The intended transformation of Grayscale’s existing Filecoin Trust into a more public company-like entity, as outlined in the Form 10 application, would have entailed the filing of quarterly reports detailing the financial activities of the trust. However, the SEC’s recent warning has cast doubt on the regulatory viability of such a structure.

In response to the SEC’s assertion, Grayscale expressed a differing viewpoint. According to the firm, Filecoin should not be classified as a security under federal securities laws. Consequently, Grayscale intends to promptly submit a detailed explanation to the SEC staff, outlining the legal basis for its position.

SEC Definition Of Securities; Implications For Crypto Industry

The comment letter received by Grayscale Investments from the SEC sheds light on the regulator’s perspective regarding the classification of Filecoin (FIL) as a security.

The SEC’s definition of securities is crucial in determining the regulatory framework and compliance requirements for various financial instruments.

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Securities, as per federal law, encompass a broad range of tradable financial assets, including stocks, bonds, and investment contracts, which are typically subject to specific disclosure and registration regulations.

The implications of the SEC’s position extend beyond the specific case of Filecoin and Grayscale Investments. It remains to be seen how this particular case will play out and what implications it will have for the broader regulatory approach to cryptocurrencies and blockchain-based assets.

-Featured image from Depositphotos

Christian Encila

They say journalists never truly clock out. But for Christian, that's not just a metaphor, it's a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.

Christian's journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).

Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling - right up his alley!

So, he landed a killer gig at NewsBTC, where he's one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).

Think Christian's all work and no play? Not a chance! When he's not at his computer, you'll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.

Speaking of chill, Christian's got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.

Here's the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day - and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.

Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors - and bosses - he deeply respects.

So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.

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