Crypto Wins Two! SEC Drop Investigation into Stacks and Paxos
Zafar Naik12 Jul 20243 min read
Everyone knows about the SEC vs. Crypto conflict. For years, the SEC has targeted various crypto organizations and their tokens. One such case, almost forgotten by the community, is SEC vs. Blockstack, a blockchain software development company. Does it ring any bells?
Well, you might be celebrating very soon! Read on.
A Surprise Win for Crypto!
On July 12, the SEC concluded a three-year investigation into Hiro Systems, formerly known as Blockstack, deciding not to pursue any enforcement action. This announcement came just a day after the SEC ended its investigation into stablecoin issuer Paxos, marking a significant win for the crypto community as it is the second investigation the SEC has dropped in two consecutive days.
Hiro Systems raised $70 million in token sales between 2017 and 2019 and launched the Stacks mainnet in January 2021. Stacks is a layer-2 blockchain that enhances Bitcoin, allowing developers to build decentralized applications. Despite early scrutiny from the SEC, Hiro asserted that the network became fully decentralized in 2021 with the introduction of a new consensus mechanism called proof of transfer.
Consequently, the company stopped treating Stacks tokens as securities, a decision that was a point of contention with the SEC.
…And the Crypto Community Erupted!
In a Friday tweet, Muneeb Ali, the creator of the Stacks protocol and current CEO of Trust Machines, confirmed that the SEC’s investigation focused on the Stacks protocol, not just Hiro Systems.
This conclusion has been a relief for Hiro, which had been under regulatory pressure since September 2021. In a public statement, Hiro expressed optimism about this development, highlighting it as the best possible outcome given the current regulatory climate in the U.S.
Impact on STX Token
The news of the SEC dropping its investigation has positively impacted the Stacks (STX) token. Following the announcement, STX’s price surged from $1.50 to above $1.70, reflecting a 5% increase within 24 hours. This boost indicates renewed investor confidence in the token and the broader Stacks ecosystem.
In Other News…SEC Ends Paxos Probe
As noted above, the SEC’s conclusion of the probe into Hiro Systems comes just a day after it announced a similar outcome for Paxos. The investigation into the U.S.-based crypto company related to Binance USD (BUSD), a Binance-branded stablecoin that Paxos issued. Binance halted BUSD support in August 2023 amid the SEC investigation.
On Thursday, July 11, 2024, the SEC announced it concluded its probe and would not pursue an enforcement action.
“We have concluded the investigation as to Paxos Trust Company, LLC. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Paxos,”
A New Era in the Making
These back-to-back decisions by the SEC to drop investigations into Hiro Systems and Paxos are seen as significant victories for the crypto industry. They suggest a possible shift in the SEC’s approach to cryptocurrency regulation and enforcement. With the regulatory environment remaining a crucial factor for the crypto market, these developments are likely to boost investor sentiment and confidence in the sector’s future.
In the SEC vs. Crypto series, it seems that crypto is gaining a clear advantage. To be honest, we couldn’t be happier!
Read Also : SEC Relaxes Crypto Reporting Rules for Banks and Brokerages: What This Means
