The U.S. Securities and Exchange Commission (SEC) has asked Grayscale Investments to withdraw its application for the Filecoin Trust, warning that its underlying asset, Filecoin (FIL), may very well be viewed as a security.
According to May 17 announcement of Grayscale, the corporate initially filed a Form 10 application with the regulator to roll out the updated Filecoin Trust product on April 14.
On Form 10, Filecoin Trust’s pre-existing product would change into more like a public company that might report its financial activities quarterly.
Grayscale said it received a comment letter on May 16 from SEC staffers during which the regulator warned that the FIL “meets the definition of collateral” under federal law and asked them to withdraw their application for a trust product.
Grayscale has stated that it believes Filecoin just isn’t a security and can send the SEC an evidence of its reasoning.
“Grayscale doesn’t consider that FIL is a security under federal securities laws and intends to promptly reply to SEC personnel explaining the legal basis for Grayscale’s position.”
Grayscale noted that it “cannot predict” whether the SEC can be persuaded to simply accept his explanation, and will “search for facilities” to register the trust. Alternatively, the investment firm warned that it could have to dissolve the trust in its entirety.
Grayscale Filecoin Trust was launched by the asset manager on March 17, 2021 with similar offerings for Oracle Chainlink (LINK) and Metaverse Decentraland (MANA)
NOTICE: Added 5 recent products @Grey scale line up!
Basic note tag $BAT
Chain link $LINK
Decentraland $MAN
filecoins $FIL
live view $LPTInterested? https://t.co/YfK2YUKgCj pic.twitter.com/jLqDph4MEH
— Sonnenshein (@Sonnenshein) March 17, 2021
Launched in 2014 by California-based tech company Protocol Labs, Filecoin is a decentralized storage platform where users pay with a native FIL token to have their data stored with providers who in turn earn FIL for his or her services.
Related: The SEC is demanding that Coinbase’s petition over upcoming crypto rules be rejected
This SEC update marks a continuation of the regulator’s crackdown on crypto products, which has fallen heavily on many US crypto exchanges recently.
On February 9, the SEC fined U.S.-based Crypto exchange Kraken for “selling unregistered securities” and ordered the exchange to shut down its staking-as-a-service program.
Recently, on March 22, Coinbase – the most important publicly traded crypto exchange within the US – received a legal notice that typically precedes motion by regulators on “potential violations of securities laws.”
The FIL price dropped shortly before the rebound and was trading at $4.53 on the time of publication, based on data from CoinGecko.
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