SEC Requests Additional Data on Three Crypto Trusts From Grayscale

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Crypto Regulation
SEC Requests Additional Data on Three Crypto Trusts From Grayscale

The United States Securities and Exchange Commission (SEC) seeks clarity from the crypto fund manager, Grayscale, over three of its crypto asset products. As reported by CoinDesk, the company revealed in its regulatory filings that it would honor the commission’s request concerning three of its crypto trusts.

The US SEC Is Investigating Grayscale’s Crypto Trust

Grayscale, on August 16, filed three disclosures with the regulator relating to its trust in the following products: Zcash (ZEC), Stellar Lumens (XLM), and Horizen (ZEN), following its meeting with the agency’s staff.

In another development, the company has also disclosed the same information to the commission in its previous filing in June. According to the content of the June filing, Grayscale revealed that it had been contacted by the staff of the Division of Corporate Finance and Enforcement about the securities analysis of the ZEC trust. 

As a result, the sponsor of the filing is about to respond to the SEC staff. Moreover, Grayscale adopted the same tone for its XLM and ZEN trust filings.

However, Grayscale acknowledged that each asset “may be a security based on current laws.” As the source reported, the first part of the acknowledgment did not appear in the crypto asset manager’s filing for June.

According to Grayscale, it contacted the commission staff in its June filing. Still, the regulator made no mention of any guidelines on whether the trust assets are securities or not.

From a broader regulatory perspective, the above events reveal the ongoing issues between the agency (SEC) and crypto exchanges amid increased industry scrutiny.

A Period of Scrutiny

The U.S. SEC has, amid the market correction, beamed its searchlight on several crypto exchanges deemed to have been playing against the rules.

Moreover, there have been cases of mysterious CEOs vanishing into thin air after swindling millions of their investors of the funds following an initial coin offering. Add to that the menace of hackers and scammers constantly on the prowl, and the SEC has every reason to clamp down on the crypto industry.

However, the commission’s probing of the biggest American exchange, Coinbase, in July changed the pace of the crackdown. It has exposed the public to another complexity in the crypto world they were unaware of.

The SEC alleges that the exchange allowed customers to purchase 150 tokens, which are securities. If the SEC considers an asset a ” security,” companies looking to trade digital assets must register with the commission. In addition, the regulator views some types of crypto scams as felonies liable to face judicial prosecution.

Due to the anonymity provided by blockchain transactions, regulators and law enforcement agencies are making a steady move against crypto exchanges. As a result, most companies and their staff are easy targets for the authorities.

Binance was also investigated in June after the SEC alleged that its BNB should have been listed as a security by the exchange.

Meanwhile, the crypto market’s collapse has boosted regulators’ drive to sanitize the digital asset industry.

Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile writer and researcher. He has keen interest in blockchain technology, cryptocurrencies, NFTs, Web3, metaverse, fintech and emerging technologies. He has tons of published works both online and in the print media. He has close to a decade of writing experience. When he is not writing, he spends time with his lovely wife and kids.