SEC Issues Warning Regarding Filecoin Meeting Security Definition


The SEC (Securities and Exchange Commission) of the US requested Grayscale Investments withdraw its application regarding a Trust for Filecoin. The SEC cited the reason behind the request as a warning that Filecoin, the asset underlying it, is viewable in terms of a security.

The Question Over Filecoin’s Identity As A Security

As per an announcement made on May 17th by Grayscale, an application using Form 10 was lodged at first by the firm. The regulator was going to launch another product based on an updated Trust on Filecoin on April 14th.

This Form 10 application, if accepted, would have made the pre-existing product of the Trust of Filecoin of the firm become an entity similar to a company owned by the public. This would mean the entity would have filed quarterly reports regarding the financial activity of the firm.

Grayscaled stated that a letter containing the SEC staff’s comment on the matter arrived on May 16th. It contained the regulator’s warning about Filecoin meeting a security definition as per federal law. As such, it also contained the request for the application withdrawal regarding the product of the Trust.

As a reply, Grayscale clarified its perspective on the matter. It said that they do not believe FIL is a security, and will explain their reasoning to the Commission in a letter. However, it was noted that whether it will be enough to persuade the SEC on the matter is unpredictable. As such, there may be accommodations sought to have the trust registered.

As an alternative choice, Grayscale issued a warning about a possible compulsion to completely dissolve the Filecoin trust. The manager of assets launched the Trust on FIL on March 17, 2021. It accompanied other offerings such as Decentraland for the Metaverse platform and Chainlink for the Oracle network.