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The SEC crackdown on crypto firms has intensified significantly since the bear market of last year incited by several collapses and bankruptcy filings of crypto exchanges.
The United States Securities and Exchange Commission (SEC) has tagged Filecoin (FIL) as an unregistered security. As a result, the regulator expects Grayscale Investments its application for Filecoin Trust.
According to an update given by Grayscale about the status of the Trust’s registration in a statement on Form 10, a letter was sent to it by the SEC detailing the categorization of FIL.
Noteworthy, the crypto investment management firm debuted the Grayscale Filecoin Trust in March 2021and this gives investors indirect access to the Filecoin token. To fulfill the firm’s outlined product lifecycle, Grayscale filed for Form 10 on Friday, April 14th, 2023 with the SEC to obtain SEC reporting status.
“On May 16, 2023, Grayscale received a comment letter from the SEC staff stating its view that the Trust’s underlying asset, FIL, meets the definition of a security under the federal securities laws and that therefore the Trust appears to meet the definition of an investment company under the Investment Company Act of 1940,” per a statement published by Grayscale while announcing the report of the SEC.
The categorization of FIL as securities does bode well with Grayscale and the crypto manager is preparing a response for the SEC which will outline the legal basis for its difference of opinion.
Pending when/if Grayscale convinces the regulator, the firm is left with only two options for the Trust; either find accommodations that would enable the Trust to register under the Investment Company Act of 1940 or eventually dissolve the Trust. Therefore, investors are expected to be ready for whatever eventualities the SEC and Grayscale arrive at.
Beyond Grayscale and Filecoin, SEC Crackdown on Crypto Firms
Obviously, the SEC crackdown on crypto firms has intensified significantly since the bear market of last year incited by several collapses and bankruptcy filings of crypto exchanges. Much to the disappointment of investors and crypto heavyweights, several crypto assets seem to fall under the securities category.
So far, only Bitcoin (BTC) has been excused from the group, according to Gary Gensler, the Chairman of the SEC.
Due to this situation, a long list of crypto firms have faced enforcement actions with some issued lawsuits by the SEC and are currently trying to defend themselves. One of the longest of such lawsuits is the SEC’s case with Ripple. Ripple was indicted for offering XRP for sale and based on the categorization of the regulator, XRP is unregistered securities. Also, BTC mining firm Marathon Digital Holdings was recently subpoenaed by the SEC for violating federal securities laws.
Renowned American cryptocurrency exchange Coinbase Global Inc (NASDAQ: COIN) also received a Wells Notice from the US regulator insinuating that it was involved in trading unregistered securities, hence the violation of securities laws. Other exchanges like Kraken and Bittrex have also received enforcement actions from the SEC.