According to SEC, Filecoin, or FIL, satisfies the definition of security, and as a result, it appears that the Grayscale Investments Trust meets the definition of an investing business.
And as such, the federal regulator requested Grayscale to withdraw the registration statement at the earliest.
The top crypto asset manager rolled out Grayscale Filecoin Trust in March 2021 and has submitted Form 10 to the SEC to gain SEC reporting status.
Grayscale issued a statement after receiving the SEC’s letter stating that it disagrees with the Commission’s assertion that FIL is a security and that it intends to swiftly reply to the SEC staff with an explanation of the legal foundation for the AUM’s position.
Grayscale cannot predict whether the SEC staff will be persuaded that Grayscale’s position is correct, and if not, whether it may become necessary for Grayscale to seek accommodations that would enable the Trust to register under the Investment Company Act of 1940 or, alternatively, seek dissolution of the Trust.
Following the news, Filecoin’s native token FIL, currently ranked 32nd by market cap, continued to show resilience and is up by 3% in the past 24 hours.
FIL is exchanging hands at $4.55 and its market cap stood at $1.9 billion.
As for Protocol Labs, the creator of the decentralized storage network Filecoin did not comment on the development.
Nevertheless, the move by the SEC reflects the hardening stance adopted by the regulator towards the digital asset industry.
The regulatory body led by Gary Gensler defended its enforcement action against major crypto players saying, “Agencies routinely enforce existing rules while considering further amendments to regulatory requirements.”
During a keynote address on May 15 at the Financial Markets Conference, Gensler was questioned about its ongoing battle with cryptocurrency firms, the regulations around it, and the reason “the SEC doesn’t publish rules for that market.”
Filecoin: SEC Ramp Up Enforcement Actions
He remains steadfast in his position and stated that “The rules have already been published.” With the exception of Bitcoin, the SEC chair currently believes that the majority of crypto assets fall under the securities definition of an investment contract.
“If the public is investing money and anticipating profit based upon the efforts of others, in a common enterprise, that’s a security,” Gensler said, adding:
“There are financial intermediaries, nodes in the network, and they need to come into compliance if they’ve got securities on their platforms.”