The US Securities and Exchange Commission (SEC) has closed its three-year investigation into Hiro Systems. The agency revealed its decision against the blockchain software developer, formerly known as Blockstack, in a filing on Friday, 12 July 2024.
Notably, the SEC’s conclusion of the investigation comes just a day after it closed a separate case involving stablecoin issuer Paxos, marking another instance where the regulatory body has opted not to pursue enforcement actions against crypto entities.
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No Action Against Hiro Systems
“Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Hiro Systems PBC,” the SEC’s division of enforcement said.
However, the letter also included a standard disclaimer emphasizing that the notice does not imply exoneration or preclude future actions resulting from ongoing inquiries.
Hiro Systems garnered attention in the crypto world by raising $70 million through token sales between 2017 and 2019.
The platform specializes in developing tools for building decentralized applications on the Stacks blockchain – a layer-2 protocol designed to complement Bitcoin.
Founded by Muneeb Ali, a prominent figure in the crypto industry and CEO of Trust Machines, Stacks launched its initial version in 2018 alongside its native token, STX.
Initially, Hiro Systems treated the tokens it sold as securities, adhering to SEC regulations such as Regulation A+ for public offerings and exemptions under Regulation D and S for accredited and international investors, respectively.
In January 2021, the company introduced a new consensus mechanism, dubbed proof of transfer, which Hiro argued decentralized the Stacks network sufficiently to reclassify STX tokens. Despite these assertions, the SEC remained cautious, initiating an inquiry in September 2021.
The conclusion of the investigation, as indicated in Friday’s filing, brings relief to Hiro Systems, potentially removing a regulatory cloud that has loomed over the company.
“The closing of the Stacks investigation gives us hope for a bright future for decentralized technologies for Bitcoin and the next-generation internet,” Ali said in a post on X in response to the SEC’s decision.
𝗡𝗘𝗪𝗦: SEC drops a three-year investigation into Stacks with no action.
Earlier this week, we received word from the SEC that after 3 years, they are terminating their investigation into the @Stacks blockchain (the protocol) and Hiro System (a company) with no action.
Stacks…
— muneeb.btc (@muneeb) July 12, 2024
SEC Drops Paxos Investigation Without Enforcement Action
Last week, the SEC also concluded its investigation into stablecoin issuer Paxos without recommending any enforcement action.
In a blog post, Paxos Trust Co., based in New York, confirmed the closure of the probe regarding its USD-backed stablecoin, formerly known as Binance USD (BUSD).
In February 2023, the SEC issued Paxos a Wells notice, indicating potential legal action over allegations that BUSD constituted an unregistered security.
“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified,” the company said in the blog post.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.