SEC Asks Grayscale to Withdraw Filing for Filecoin Trust Product
- The United States SEC has asked Grayscale to withdraw its application for the Filecoin Trust Product.
- The US regulatory agency believes that Filecoin (FIL) “meets the definition of a security” under federal law.
- Grayscale will write an explanation to the SEC as to why FIL is not a security and demand reasoning from the agency.
- The firm said that it might have to withdraw the application and completely dissolve its Filecoin product.
- It filed an updated Form 10 application to transform the Filecoin Trust Product into a company with quarterly financial reports.
The United States Securities and Exchange Commission (SEC), under the leadership of Chairman Gary Gensler, has remained clear on one thing: all crypto assets other than the world’s largest cryptocurrency, Bitcoin (BTC), are securities. In a new turn of events, popular investment management firm Grayscale, which is also a part of the Digital Currency Group (DCG), has stated that the regulator has asked to withdraw the application for the Filecoin Trust Product, warning the company that FIL “meets the definition of a security.”
As per a May 17 announcement from Grayscale, the SEC believes that Filecoin (FIL), the 32nd-largest cryptocurrency by market capitalization with a share of $1.9 billion, can be seen as a security. The updated Form 10 application to debut an updated Filecoin Trust Product was filed on April 14.
This application would enable the firm’s pre-existing Filecoin Trust Product to become more like a company with public shares that would file quarterly financial reports, and people purchasing the product would be more like shareholders. However, the SEC has asked Grayscale to withdraw this application since the underlying assets, i.e., Filecoin, have the attributes of a security.
The comment from the SEC was received on May 16 by Grayscale, wherein it was stated that FIL “meets the definition of a security” under federal law. On the other hand, the investment management firm will be sending out an explanation to the regulator to prove that the cryptocurrency is not a security and ask the agency for its reasoning behind this argument.
“Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position,” said the announcement.
The firm added that it “cannot predict” whether the SEC will be persuaded into accepting its explanation. However, the Stamford, Connecticut-based company might “seek accommodations” for the registration of the trust. It added that there is a possibility that the Filecoin Trust Product could be dissolved completely.
The Filecoin Trust Product debuted in March 2021, as seen by the Twitter post from Michael Sonnenshein below. Along with FIL, products related to Livepeer (LPT), Chainlink (LINK), and Decentraland (LAND) were also announced.
Filecoin was created in 2014 by its parent company, Protocol Labs. The blockchain is capable of storing “humanity’s most important information.” The project has been described as an incentive layer for the Interplanetary File System (IPFS), a P2P storage network where users pay for storage in FIL.
As per an earlier report from BitcoinWisdom, Protocol Labs laid off almost 21% of its workforce due to the worsening macroeconomic situation. The CEO of the company, Juan Benet, confirmed that “they have taken the decision to part ways with a number of valued friends and colleagues,” in February 2023. It was confirmed that around 89 people would be leaving the firm, but the firm “worked extremely hard to avoid this.”
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
