SEC Drops Investigation into Blockchain Developer Hiro Systems, Formerly Blockstack, Following $70 Million Token Sales

The U.S. Securities and Exchange Commission (SEC) has dropped a three-year-old investigation into Hiro Systems, a blockchain software developer that raised $70 million in token sales from 2017 to 2019. This news comes as a relief to the crypto industry, which has been in a long-standing battle with the regulator.

The SEC’s division of enforcement stated in a letter attached to a Friday filing that they do not intend to recommend an enforcement action against Hiro Systems, formerly known as Blockstack. However, they also included a disclaimer that this decision does not mean the company has been exonerated and that further action could still be taken.

Hiro Systems, led by crypto industry veteran Muneeb Ali, develops tools for developers to build apps on Stacks, a layer-2 blockchain that works alongside Bitcoin. The company initially treated the tokens it sold as securities and conducted token sales under various SEC regulations.

In January 2021, Hiro launched a new version of Stacks with a new consensus mechanism, claiming the network had become fully decentralized. This led the company to believe that it was no longer necessary to treat Stacks tokens as securities, a decision that the SEC was initially skeptical of.

After responding to an inquiry from the SEC’s division of enforcement in September 2021, Hiro has now received confirmation that the investigation has been dropped. This news is a significant victory for the company and the broader crypto industry, as it removes a cloud of uncertainty that had been looming over Hiro Systems.

In a tweet following the filing, Muneeb Ali mentioned that the SEC’s probe looked into the Stacks protocol as a whole, not just the Hiro entity. This clarification sheds light on the scope of the investigation and highlights the complexity of regulatory scrutiny in the crypto space.

Overall, the conclusion of the SEC’s investigation into Hiro Systems is a positive development for the company and the crypto industry at large. It demonstrates a step towards clarity and regulatory certainty in a rapidly evolving sector.