The crypto community achieved another significant victory against the US Securities and Exchange Commission (SEC) as the regulator has reportedly halted its investigations into Stacks, a prominent Bitcoin layer-2 network.
On July 12, Hiro Systems, the developer behind Stacks, revealed that the SEC had informed them on July 9 about the decision to end the probe. Hiro had raised $70 million from token sales between 2017 and 2019.
SEC Drops Investigations Into Stacks
In its letter, the SEC’s enforcement division indicated that it would not recommend any enforcement action against the firm. However, the notice clarified that this decision should not be seen as an exoneration or a guarantee that future actions wouldn’t arise from the investigation.
Muneeb Ali, a board member of Hiro Systems, expressed that this outcome is the best a company in the industry could hope for, but the US regulations still need improvement. He highlighted that Stacks had the first-ever SEC-qualified offering in 2019 and became decentralized before its mainnet launch in January 2021. Despite this, the SEC began its investigation in July 2021.
“We need a regulatory system that meets builders of innovative open protocols where they are. We’ll continue working with policymakers and developers to help make this happen. The closing of the Stacks investigation gives us hope for a bright future for decentralized technologies for Bitcoin and the next-generation internet,” Ali stated.
Industry Reactions and Criticisms
The SEC’s decision outraged the crypto community, noting that Stacks’ compliance efforts did not shield it from scrutiny. Billionaire investor Mark Cuban remarked that while the SEC’s move is positive, it still presents risks for projects aiming to work closely with the regulator.
“If you needed any further confirmation of the craziness at the SEC… It’s not that they dropped their probe… It’s crazy because Stacks was one of the VERY FEW tokens that went through the process of getting approved to raise money with their token back in 2019,” Cuban commented.
Positive Market Impact for STX Token
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Meanwhile, this decision comes during a notable week for Stacks’ STX token, which saw a nearly 20% increase over the past seven days. According to news sources, it trades at around $1.7 as of press time.
Notably, this is the second crypto-related investigation the SEC dropped this week. On July 11, Paxos announced that the SEC decided against taking enforcement action regarding its investigation into the Binance USD (BUSD) stablecoin.
The SEC Stacks Network Investigation marks a pivotal moment in the relationship between regulatory bodies and the crypto industry. The SEC, responsible for regulating securities markets, had launched an investigation into the Stacks network, despite Stacks’ proactive compliance measures.
In 2019, Stacks had the first-ever SEC-qualified offering and successfully raised $70 million through token sales. By January 2021, Stacks had become decentralized, yet the SEC initiated an investigation in July 2021. The crypto community, while celebrating the SEC’s decision to halt the investigation, remains cautious. This development highlights ongoing regulatory challenges faced by decentralized networks and projects in the cryptocurrency sector.
Muneeb Ali’s remarks hint at the need for a regulatory framework that supports innovation in open protocols. The SEC’s decision to drop the investigation into Stacks, while significant, does not eliminate the risk of future regulatory actions. Projects aiming to collaborate closely with regulators still face uncertainties.
Conclusion
The closure of the SEC Stacks Network Investigation is a notable milestone for the crypto community, illustrating the evolving regulatory environment for Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies. As the industry continues to grow, ongoing dialogue between regulators and innovators is crucial to fostering a supportive ecosystem for decentralized technologies.
The BIT Journal will continue to provide crypto updates on the SEC Stacks Network Investigation and other regulatory developments affecting Bitcoin (BTC), Ethereum (ETH), and the broader cryptocurrency market. Stay tuned for more crypto updates and insights from The BIT Journal.
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