- Aug 30, 2022
This might be something you’ve heard of before, but this is the first time I’ve seen someone with billions in crypto say that the SEC would NOT provide guidance about whether a crypto was or wasn’t a security, but instead asked for that fund’s own analysis of whether the cryptos in question were securities.
The SEC Is Getting Clearer About How It Plans to Regulate Crypto
We're reading between the lines of Grayscale's recent disclosures about SEC inquiries.
|Grayscale Investments, a subsidiary of CoinDesk parent company Digital Currency Group, disclosed in regulatory filings that the SEC has been asking about its analysis of zcash (ZEC), horizen (ZEN) and stellar (XLM). Moreover, the regulator appears to have suggested that those three cryptocurrencies might be securities under federal law.|
|Why it matters|
|The SEC has yet to begin any kind of formal effort to issue rules directing crypto exchanges to register as securities exchanges. In the absence of that formal rulemaking effort, we’re left looking at how the SEC seems to be approaching cryptocurrencies it sees as securities. News that it identified more cryptocurrencies as securities this year sheds (a tiny bit) more light on that question.|
|Breaking it down|
|ZEC, ZEN and XLM may be securities, Grayscale said in regulatory filings for its trust products based on those three cryptocurrencies.|
The SEC’s Divisions of Corporation Finance and Enforcement contacted Grayscale earlier this year, CoinDesk’s Danny Nelson reported over the weekend, asking about the trust products tied to those three cryptocurrencies.
What’s more, reading between the lines, it would appear the SEC has said those cryptocurrencies might be securities.
“The SEC staff has not provided any guidance as to the security status of ZEC and the sponsor has been contacted by staff from the SEC’s Divisions of Corporation Finance and Enforcement concerning the sponsor’s securities law analysis of ZEC,” the filing for Zcash said in June.
The filing in August said Grayscale received a memorandum from its “external securities lawyer,” which led the company to feel comfortable in saying those three cryptocurrencies aren’t securities, but nevertheless, based on what the SEC has said, Grayscale “acknowledges that ZEC [etc.] may currently be a security, based on the facts as they exist today, or may in the future be found by the SEC or a federal court to be a security under the federal securities laws.”