Hiro Systems Clears SEC Probe, Complies with Regulations Since 2019

Hiro, formerly known as Blockstack, has treated its native token, STX, as a security since its launch in 2018.

CoinChapter: United States SEC Drops 3-Year Probe into Stacks Layer-2 Developer Hiro Systems

The United States Securities and Exchange Commission (SEC) has concluded its three-year investigation into Hiro Systems, the company behind Bitcoin’s Stacks layer-2 blockchain. According to a regulatory filing on July 12, Hiro, which raised $70 million from token sales between 2017 and 2019, will not face enforcement action from the SEC.

Hiro Systems Clears SEC Probe, Complies with Regulations Since 2019

Hiro, formerly known as Blockstack, has treated its native token, STX, as a security since its launch in 2018. The SEC’s recent filing stated,

“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, formerly known as Blockstack PBC.”

Since at least 2019, Hiro has been in regular compliance with the SEC, filing under Regulation A+, which provides a registration exemption for smaller securities issuances. The company also raised funds under Regulation D and S exemptions, which cater to private and international offerings.

Hiro Systems Claims Stacks Blockchain Decentralization, Avoids Securities Classification

In 2021, Hiro argued that the Stacks blockchain had become sufficiently decentralized, thus removing its classification as a securities issuer. The company stated in a filing,

“Management concluded further that if Hiro is no longer in the position of providing, and will no longer be able to provide, essential managerial services to the Stacks Blockchain, then it is no longer necessary for Hiro to treat the Stacks Tokens as investment contracts that are securities under the federal securities laws.”

This decentralization claim highlights the ongoing debate in the crypto industry about when and how a blockchain project can be deemed decentralized enough to escape securities regulation. Hiro’s stance reflects a growing trend among blockchain companies seeking to distance themselves from stringent regulatory oversight.

SEC Drops Investigations into Hiro and Paxos, Signals Possible Shift in Crypto Regulation

This news comes on the heels of another dropped investigation by the SEC. On July 11, Paxos announced that the SEC decided not to pursue enforcement action against the Web3 infrastructure platform concerning its Binance USD (BUSD) stablecoin. These decisions suggest a possible shift in the SEC’s approach to crypto regulation.

Despite these dropped investigations, the SEC continues to take actions against other major crypto firms, including Ripple, Binance, Kraken, and Coinbase. Recent court rulings have limited the SEC’s ability to enforce regulations aggressively. For instance, the Supreme Court’s June decision in Loper Bright v. Raimondo overturned the Chevron Doctrine, which had previously granted regulators broad discretion in interpreting laws.

STX Token Performance Mirrors Regulatory Developments

Performance of the STX token since its launch reflects market reactions to these regulatory developments. CoinMarketCap provides detailed insights into the token’s performance, illustrating the real-world impact of these regulatory decisions.