SEC categorizes filecoin as security; Grayscale faces regulatory challenge

In a significant development for the digital asset industry, the US Securities and Exchange Commission (SEC) has officially declared filecoin as a security. 

On May 17, the crypto investment business Grayscale Investments withdrew its application to launch a filecoin trust fund. Initially, Grayscale voluntarily filed Form 10 to the SEC to gain reporting status for the trust.

However, the response from the regulator requires that the application is withdrawn now, as filecoin is treated as security.

Grayscale promptly reiterated that FIL should not be regarded as a security. The corporation will soon provide the regulator with a brief explanation of its legal position. 

On the other hand, Protocol Labs, the organization responsible for creating the filecoin protocol, still needs to present an official comment addressing this new development. FIL, presently ranked 33rd by market capitalization, witnessed a decrease in value when the news spread, and it is currently trading at $4.54.

With this action, the SEC has again shown the extent of its heightened monitoring of the environment around digital assets. Throughout this year, the regulatory body has levied fines on several American crypto enterprises suspected of participating in distributing unregistered securities. 

Even though the SEC does not consider all digital assets securities, the Howey test remains an essential benchmark. If investors contribute money to benefit from the efforts of a venture, then that asset is considered an “investment contract” under this definition.

The moves taken by the SEC indicate that the bitcoin business has a rising need for regulatory certainty. As talks about categorizing and managing digital assets unfold worldwide, market players and industry stakeholders anxiously await additional developments.