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Filecoin

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

Christian Encila by Christian Encila
2 weeks ago
in Cryptocurrency Market News
Reading Time: 3 mins read

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.

Related Reading: Conflux Network Partners With China Telecom For Blockchain, SIM Project – Details

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. 

BTCUSD below the crucial $28K region. Chart: TradingView.com
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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

Tags: btcusdcrypto regulationethusdfilecoingrayscaleSecurities and Exchange Commission
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Christian Encila

Christian Encila

Christian is a former journalist and editor, as well as a layout design consultant, who previously held leadership positions at Sun.Star News Philippines and Ang Peryodiko News, a local daily in Manitoba, Canada. Alongside his passion for writing, he is an avid fan of cryptocurrency and works tirelessly throughout the week. When he's not on his computer, you can find him tinkering with his old motorbike as a grease monkey, or lounging on the patio hammock while pondering about artificial intelligence and whether he'll ever understand his cat's thoughts and calmness.

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