The US Securities and Exchange Commission (SEC) has asked Grayscale Investments to withdraw its application for the Filecoin Trust, warning that its underlying asset Filecoin, can be regarded as a kind of security.
According to a May 17 announcement by Grayscale, the company initially filed a Form 10 application with the regulator to launch an updated Filecoin Trust product on April 14.
Form 10 will make the company's pre-existing Filecoin Trust product more akin to a public company, which would file quarterly reports on its financial activities.
Grayscale said it received a comment letter from SEC staff on May 16, after which the regulator warned that FIL “meets federal law's definition of a security” and asked them to withdraw their application for the trust product. Grayscale said that, in its view, Filecoin is not a security, and it will explain its reasoning to the SEC.
"Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff explaining the legal basis for Grayscale's position. Grayscale noted that it "cannot predict" whether the SEC will be persuaded to accept its interpretation and may "seek convenience" for trust registration. Or, the investment firm warned, it could be forced to dissolve the trust entirely.
Grayscale Filecoin Trust launched by asset manager on March 17, 2021 alongside a similar offering from oracle network Chainlink and metaverse platform Decentraland. Launched in 2014 by California-based tech company Protocol Labs, Filecoin is a decentralized platform for data storage where users pay with the native FIL token to store their data with providers , and suppliers can earn FIL through their services. The SEC update marks the regulator's continuation of its crackdown on crypto products, which has recently cracked down on many US crypto exchanges.
On Feb. 9, the SEC fined US-based cryptocurrency exchange Kraken for “selling unregistered securities” and ordered the exchange to shut down its staking-as-a-service program. Most recently, on March 22, Coinbase, the largest publicly- A traded cryptocurrency exchange in the US, received a legal notice, usually before regulators take enforcement action for “possible violations of securities laws.”
