The US Securities and Exchange Commission (SEC) has declared that Filecoin’s FIL token is a security, according to crypto asset manager Grayscale Investments. Grayscale had lodged an application with the regulator to launch a Filecoin Trust product on April 14, which would provide investors with indirect exposure to the underlying FIL token. However, the SEC warned Grayscale that FIL “meets the definition of a security” under federal law and asked them to withdraw their application for the Trust product. Grayscale has argued that Filecoin is not a security and will be sending an explanation to the SEC for its reasoning. This marks a continuation of the SEC’s crackdown on crypto products which has seen the regulator come down hard on a number of US crypto exchanges. The SEC of late has fined US-based crypto exchange Kraken for “selling unregistered securities” and ordered it to shut down its staking-as-a-service program. Finally, Coinbase, the largest publicly traded crypto exchange in the US, received a Wells Notice from the regulator for “potential violations of securities laws”.
Grayscale believes that FIL is not a security under federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position. However, Grayscale could not predict whether or not the SEC will be persuaded into accepting its explanation, and may “seek accommodations” for the registration of the Trust. Alternatively, the investment firm warned that it may be forced to dissolve the Trust in its entirety. This latest development adds to the growing concerns around the SEC’s harsh approach towards crypto products.