The United States Securities and Exchange Commission (SEC) has asked Grayscale Investments to withdraw a registration statement made for a new crypto asset management fund.
Digital asset management firm Digital Currency Group had notified the SEC of the launch of the Grayscale Filecoin Trust (FILG) fund last April. Through this new fund, the company wants to offer its clients exposure to FIL, the native cryptocurrency of the Filecoin open-source network, focused on creating a decentralized secure file storage system.
However, Grayscale Investments’ request was answered by the SEC with a caveat.
The company recently reported that the U.S. securities regulator sent it a comment letter saying it should withdraw FLIG’s registration statement “promptly.” Indeed, the SEC considers that the underlying asset of the Grayscale Filecoin Trust fund, the Filecoin (FIL) cryptocurrency, meets the definition of value under the United States federal securities laws and, by Therefore, the fund that wants to launch Grayscale Investments would meet the definition of an investment company under the Investment Company Act of 1940.
Grayscale investments to refute SEC advice
Although the SEC is the federal agency responsible for interpreting United States securities laws to classify assets that comply with them, Grayscale Investments believes that the regulator is not right in wanting to classify FIL as a title.
The company has indicated that it will send a response to the SEC with the legal arguments explaining why Filecoin should not be classified as a security under the laws of the country. However, the company acknowledges that it is not sure that it can convince agency staff of its position vis-à-vis FIL.
If the SEC continues to list FIL as a security, Grayscale will need to put in place other arrangements to allow the Grayscale Filecoin Trust to register under the Investment Company Act of 1940 or, failing that, to dissolve the fund, the company said. .
The SEC’s fight against cryptocurrencies
This is not the first time the SEC has claimed that a cryptocurrency is classified as a security under US law. In fact, the federal agency has been mired in a long legal battle against Ripple, launching a lawsuit in 2020 accusing the company of offering the XRP cryptocurrency as unregistered security.
A similar situation repeated itself in 2021, when the SEC sued startup LBRY for the unregistered sale of the LBC token.
Additionally, cryptocurrency exchanges like Paxos have suffered from the actions of the regulator. Earlier this year, the SEC ordered Paxos to suspend issuance of BUSD, a dollar-pegged stablecoin, because it is classified as a security. The lawsuit intrigued the crypto community because BUSD, being a stablecoin, maintains a stable value and therefore its holders cannot expect to monetize this coin.
The crypto community has taken to the SEC’s actions as part of a crusade with which the regulator seeks to push the cryptocurrency industry, and innovation in general, out of the United States.
WIRE price increases by 3%
Even though the SEC might classify FIL as a security, the cryptocurrency is on the rise. At the time of writing, FIL has gained 3.5% in the market, trading at $4.62 per unit. However, FIL saw a 3.7% drop on Wednesday, only to regain its value soon after.