Grayscale Claims That XLM, ZEC, And ZEN May Be Securities Following An SEC Investigation

In June 2022 and again in the middle of August 2022, digital asset management Grayscale submitted applications for the Stellar (XLM), Zcash (ZEC), and Horizen (ZEN) trusts.

The second filing was a response to an inquiry from the Division of Corporate Finance of the Securities and Exchange Commission, which questioned Grayscale‘s evaluation of the coins in light of current securities rules.

As the bad market exerts pressure on Grayscale’s other trusts

The cryptocurrency trusts offered by Grayscale give investors simple access to digital assets in addition to stocks and bonds. In contrast to the $40 million in the in question cryptocurrencies, it holds billions of dollars in BTC and ETH in its Bitcoin and Ethereum trusts. The corporation had assets of $60 billion during the height of the cryptocurrency market, when bitcoin reached $69,000.

Going back on claims made in the June filing, the firm acknowledged that the three altcoins might be securities in its August filing. The firm argued that while the altcoins were not currently defined as securities, they might become so in the future and that the SEC had not issued any guidance to that effect.

While only a small portion of the company’s cryptocurrency assets are made up of altcoins, the prospect that they may be securities means that Grayscale may have to retire some of its more illustrious trusts.

Grayscale legal action against the SEC

Although there is little agreement in the US as to whether cryptocurrencies are securities and as such come under the SEC’s purview, the agency’s inquiry shows the agency’s efforts to regulate the crypto market.

Grayscale and the SEC are engaged in a legal dispute over the agency’s denial of Grayscale’s request to transform its Bitcoin Trust into a spot bitcoin exchange-traded fund. The trust’s shares now trade at a discount to the price of a bitcoin, so the conversion would give the corporation some relief.

The NYSE Arca platform that would list the ETF was found to be susceptible to market manipulation by the SEC in June. In response, Donald B. Verrilli Jr., the company’s chief legal strategist, submitted a petition to the United States Court of Appeals for the District of Columbia Circuit to contest the SEC’s judgment.

The third quarter of 2023 or early 2024 is when the courts are most likely to rule on Grayscale’s lawsuit, which has the potential to go all the way to the US Supreme Court.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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