According to CoinDesk, the U.S. Securities and Exchange Commission (SEC), on July 12, filed a court document announcing that it will no longer pursue its investigation into Hiro Systems.
Hiro Systems, formerly known as Blockstack, is a blockchain software developer that created one of the early Bitcoin layer-2 solutions, Stacks (STX).
The U.S. SEC dropped a three-year-old investigation into Hiro Systems, a blockchain software developer (formerly known as Blockstack) that raised $70 million in token sales from 2017 to 2019. Blockstack launched the first version of the Stacks chain with its eponymous token (STX)…
— Wu Blockchain (@WuBlockchain) July 12, 2024
In 2021, the SEC began investigating Blockstack over suspicions that its $70 million fundraising from 2017 to 2019 might have been an illegal securities offering.
The SEC’s notice stated that based on the information gathered, the commission would not take further legal action against Hiro Systems. However, this does not mean the project is cleared of all suspicions, nor does it prevent the SEC from taking action in the future.
Blockstack launched the layer-2 Stacks in 2018 and sold STX tokens as securities. The company registered with the SEC to sell a limited amount of STX without registering as securities, as the buyers were accredited investors and foreign investors.
By 2021, the project announced it had reached a level of decentralization with the launch of a new version of Stacks using the Proof of Transfer algorithm. Blockstack argued that since it only provided management services for the Stacks blockchain, the STX tokens should no longer be considered securities.
However, the SEC disagreed with this interpretation, leading to the investigation into Hiro Systems.
This is the second legal win for the crypto industry against the SEC this week, following the SEC’s announcement to end its investigation into stablecoin issuer Paxos, removing the securities label from the BUSD token issued in collaboration with Binance.
Despite these developments, the SEC still has ongoing cases against Coinbase, Binance, Kraken, and blockchain infrastructure developer Consensys and has warned DEX Uniswap. The commission has also imposed a $4.47 billion fine on Do Kwon and Terraform Labs.
Related news: SEC Allows Select Firms to Bypass Controversial Crypto Accounting Bulletin
