The SEC Has Issued a Warning That Filecoin Meets the Definition of a Security

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Last Updated on May 19, 2023 by Bitfinsider

The Securities and Exchange Commission (SEC) of the United States has urged Grayscale Investments to withdraw its application for a Filecoin Trust, warning that its underlying asset, Filecoin, can be viewed as a security.

Grayscale announced on May 17 that it has filed a Form 10 application with the Commission on April 14 to introduce an improved Filecoin Trust product.

The Form 10 would elevate the firm’s pre-existing Filecoin Trust product to the status of a public company, requiring quarterly financial reporting.

On May 16, Grayscale said it got a comment letter from SEC staff, in which the regulator cautioned that FIL “meets the definition of a security” under federal law and ordered them to withdraw their application for the trust product.

Grayscale declared that, in its opinion, Filecoin is not a security and that it will explain its reasoning to the SEC.

Grayscale stated that it “cannot predict” if the SEC will accept its explanation and that it may “seek accommodations” for the trust’s registration. In the alternative, the investment firm warned that it might be obliged to dissolve the trust entirely.

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