A recent letter from the Unitedย States Securities and Exchange Commission (SEC) to leading financing management company Grayscale has sparked a reaction amongย the cryptocurrency and Filecoin community.ย The SECย labeled Filecoin a financial security while responding to Grayscaleโs Filcoin Trust registration statement.
Billionaire investor Mark Cuban commented on a recent tweet about the SECโs states. Althoughย while articulating his response, Cuban suggested ways cryptocurrency corporations can avoid future SEC lawsuits on potential securities law violations.
Mark Cubanโs Lawsuit-Evading Idea
Mark Cuban narrated a scenario where digitalย currency issuing corporations could evade an SEC lawsuit by releasing their entire cryptoย token supply without leaving treasury reserves. Cuban suggested that the corporations use their cryptoย tokens for liquidity on decentralizedย financeย (DeFi) applications.
Then, dissolve the original entity that released the cryptoย tokens, circling in the secondary market without direct ties to the underlying blockchain.
The billionaire tagged his idea โtrue decentralization.โ That will prevent regulatoryย authorities like the SEC from closing down the cryptoย token like itโs attemptingย to do with Filecoin and others.
Cubanโs suggestion stirred reactions from the cryptocurrency community members. Someone said the Unitedย States securities laws are โblack holes that suck in everything invested.โย
Another respondent said Cubanโs idea wouldnโt work with protocols as it requires minting all cryptoย token supplies upfront, which is limiting.ย Nonetheless, a smart contract could hold the cryptoย token supply, releasing it under governance or in a predetermined manner.
Even the pro- XRPย Rippleย (XRP) lawyer, John Deaton, weighed in. Deaton commented on Cubanโs suggestion, describing it as โsmart and probably someoneโs playbook at the moment.โ
Nonetheless, the lawyer insisted that the cryptocurrency ecologicalย system continue fighting the SECโs narrative that tags every cryptoย token but Bitcoinย (BTC) as a security. Summing it up, Deaton wrote: โThe underlying investment in an financing contract is never a security.โ
Grayscale Disagrees With SEC States On Filecoin
These discussions weigh in on a press release that stated Grayscale disagreed with the SECโs assertย that Filecoin, the underlying investment in its new trust fund, is a security.
Grayscale Assets filed a registration statement of its Grayscale Filecoin Trust (OTCQB: FILG) with the SEC on April 14, 2023.
The digital investment management company wanted to register the trustโs shares under section 12(g) of the Securities Exchange Act of 1934. Onย theย otherย hand, the company received a letter from the SEC stating that FIL, the trustโs underlying investment, is a security.
Grayscale plansย to respond to the regulatorโs letter. Althoughย while it cannot predict the SECโs reaction to its response, Grayscale would seek other ways to register the trust should the regulatingย authority disagree.
Featured image from Pexels, a chart from Tradingview.com
