The US Securities and Exchange Commission (SEC) has ended its three-year investigation into Hiro Systems, the developer of Bitcoin layer 2, Stacks. Hiro, formerly known as Blockstack, raised $70 million through the sale of STX tokens between 2017 and 2019.
Based on the information available to us at this time, we do not intend to recommend an enforcement action by the Commission against Hiro Systems PBC, formerly known as Blockstack PBC.
This announcement was made in a regulatory filing. Hiro, previously known as Blockstack, had raised $70 million through STX token sales between 2017 and 2019.
Compliance with SEC Rules
Since its launch in 2018, Hiro has treated its native token, STX, as a security in accordance with US law. In a letter included in Friday’s filing, the SEC stated:
The developer of Stacks has regularly filed with the SEC under Regulation A+, a registration exemption for smaller securities offerings. The company has also raised funds under commonly used exemptions for private and international offerings.
Hiro’s Decentralization Argument
The staff also concluded that if Hiro is no longer able to provide essential management services to the Stacks Blockchain, it is no longer necessary for Hiro to treat Stacks Tokens as investment contracts that are securities under federal securities laws.
In 2021, Hiro argued that the Stacks blockchain had become sufficiently decentralized for the company to no longer qualify as an issuer of securities.
Broader Regulatory Context
Recently, Paxos announced that the SEC had decided to drop its charges as part of its investigation into the Binance-related stablecoin, BUSD.
Despite these decisions, the SEC continues to pursue legal actions against companies such as Ripple, Binance, Kraken, and Coinbase.
