SEC seeks info from Grayscale about three crypto trusts: CoinDesk

Quick Take

  • The U.S. Securities and Exchange Commission (SEC) has contacted crypto asset manager Grayscale Investments with questions about three crypto trusts. 
  • The SEC scrutiny focuses on Grayscale’s “securities law analysis” of the company’s Stellar, Zcash and Horizen trusts.

Crypto asset manager Grayscale Investments is in the process of responding to questions from the U.S. Securities and Exchange Commission (SEC) about three of its cryptocurrency trusts, the company said in recent regulatory filings first spotted by CoinDesk.

Grayscale disclosed its contact with SEC staff in three Aug. 16 filings, which focus on the company's trusts in Zcash (ZEC), Stellar Lumens (XLM) and Horizen (ZEN). It also previously mentioned this contact with the regulator in June filings.

"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," Grayscale said in its June and August filings regarding its ZEC trust. "The sponsor is in the process of responding to the SEC staff." The same language appears in Grayscale's filings for its XLM and ZEN trusts, with the asset names changed to match each trust. 

Grayscale also said it acknowledges that each of these asset types "may currently be a security," based on today's facts, or could be deemed a security in the future by the SEC or a federal court. The first part did not appear in Grayscale's June filings for the above-mentioned trusts, CoinDesk pointed out.

The company did mention its contact with SEC staff in its June filings but said at the time that the regulator had not provided guidance on whether those cryptocurrencies were securities. An emailed request for comment was not returned by press time.

These disclosures provide insight into the current conversations happening between the SEC and crypto companies in the wake of increased regulatory oversight of the industry. In May, the SEC said it would significantly expand the unit in charge of investigating securities law violations in the cryptocurrency space.

In July, the regulator deemed nine cryptocurrencies to be securities in an insider trading complaint against a former Coinbase employee and two others.  

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