SEC Drops Investigations into Hiro Systems and Paxos

The ongoing SEC vs. Crypto saga has taken a surprising turn. For years, the U.S. Securities and Exchange Commission (SEC) has targeted various crypto organizations. However, two recent decisions have sparked optimism within the crypto community.

On July 12 the SEC concluded a three-year investigation into Hiro Systems, previously known as Blockstack. They did so without pursuing any enforcement action. This decision followed closely when the SEC dropped its probe into stablecoin issuer Paxos just a day earlier. What does this mean for the future of cryptocurrency regulation?

Hiro Systems raised $70 million through token sales from 2017 to 2019. They launched the Stacks mainnet in January 2021. Stacks is a layer-2 blockchain enhancing Bitcoin. It enables developers to build decentralized applications. Despite early scrutiny, Hiro declared the network fully decentralized in 2021 with new proof of the transfer consensus mechanism. This shift led the company to stop treating Stacks tokens as securities. This was the point of contention with the SEC.

Muneeb Ali, the creator of the Stacks protocol and current CEO of Trust Machines, confirmed in a tweet the SEC’s investigation was focused on the Stacks protocol not just Hiro Systems. The investigation's conclusion was a relief for Hiro. It comes after regulatory pressure since September 2021. Hiro’s public statement highlighted this as the best possible outcome given the U.S. regulatory climate.

The SEC's decision positively impacted the Stacks (STX) token. STX's price surged from $1.50 to above $1.70. This reflects a 5% increase within 24 hours. The boost signifies renewed investor confidence in both the token and the broader Stacks ecosystem.

The SEC’s conclusion of its investigation into Hiro Systems came a day after it ended its probe into Paxos. The investigation related to Binance USD (BUSD), a Binance-branded stablecoin issued by Paxos. Binance halted BUSD support in August 2023 amid the SEC investigation. On July 11 the SEC announced it would not pursue enforcement action against Paxos.

These consecutive 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. Enforcement could also change. With the regulatory environment being crucial for the crypto market these developments are likely to boost investor sentiment. Confidence in the sector’s future may increase. Is the crypto industry gearing up for more regulatory leniency or are these isolated wins?