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The popular altcoin on Binance exchange, FIL Coin, has been declared a security by the Securities and Exchange Commission (SEC). This alarming news quickly spread, resulting in a swift drop in the coin’s value. Due to accumulated positions in future contracts, investors may witness sudden price fluctuations. High volatility is anticipated in the FIL Coin price in the upcoming hours.
Why is FIL Coin Dropping?
According to an announcement by Grayscale released just a few minutes ago, the SEC has contacted the company and stated that FIL Coin is a security. Consequently, it demanded the suspension of the traded investment fund for FIL Coin. Immediately after we shared the news, the price of Filecoin dropped from $4.56 to $4.398. The altcoin’s price continues to fall.
Such declines are typically expected when the SEC declares altcoins as securities. However, the volatility may further increase in the coming hours. It’s also possible that we may witness sudden upward spikes for the liquidation of positions that will accumulate in futures contracts.
Is FIL Coin a Security?
According to the SEC, yes, FIL Coin is a security. As a result, the SEC made the necessary warnings for the investment fund issued by Grayscale. Even if Grayscale does not agree with the regulator, what matters is how the securities regulator views the relevant cryptocurrency. The company’s announcement stated the following:
“On May 16, 2023, Grayscale received a letter of opinion from SEC staff, stating that FIL, the underlying asset of the Trust, met the definition of a security under federal securities laws, and therefore, the Trust met the definition of an investment company under the 1940 Investment Company Act. The SEC staff requested Grayscale to withdraw the registration statement immediately. Grayscale does not believe that FIL is a security under federal securities laws and plans to respond immediately with a legal basis for Grayscale’s position. Grayscale cannot predict whether the SEC staff will be convinced that Grayscale’s position is correct and whether, if not convinced, Grayscale will need to seek accommodations to register under the Investment Company Act of 1940 or alternatively request the termination of the Trust.”
The steps that the SEC will take in the coming days could be decisive on the FIL Coin price. This development suggests that a bigger chaos might be looming. SEC Chairman Gensler had stated that he believes all altcoins are securities. Grayscale has already issued investment funds for many other altcoins besides FIL Coin. Notifications related to other altcoins, including ETH, within a few days could cause a new wave of decline in the cryptocurrency markets.
On the other hand, the liquidation of the fund by Grayscale could lead to a greater decline for FIL Coin.
