SEC drops three-year investigation into Stacks protocol
- SEC dropped its investigation into Bitcoin Layer 2 network Stacks.
- SEC began investigating Hiro Systems and Stacks protocol in 2021 after the protocol became fully decentralized.
- STX is up over 5% following the announcement.
STX shot up more than 5% on Friday following news that the Securities & Exchange Commission (SEC) dropped a three-year investigation into Hiro Systems and its Bitcoin Layer 2 protocol Stacks after three years of investigation.
SEC terminates Stacks investigation, another win for crypto
Hiro Systems PCB, the developers behind Bitcoin Layer-2 protocol Stacks, disclosed that the SEC has dropped its probe into the company and the Stacks protocol, with no intention to take legal action against them. The company received the notice earlier this week, alongside a regulatory filing the SEC sent on Friday.
"Earlier this week, we received word from the SEC that after 3 years, they are terminating their investigation into the Stacks blockchain (the protocol) and Hiro System (a company) with no action," co-founder Muneeb Ali stated in an X post on Friday.
The SEC investigated Stacks and Hiro Systems for three years after the regulator claimed it suspected that STX was being sold as a security. The whole issue dates back to 2018, after the company's initial launch of STX, when it sold the tokens as securities under the SEC's Regulation A+. The regulation permitted a limited public sale of securities without full registration, allowing Hiro to raise over $20 million from sales of STX.
In 2021, Stacks became fully decentralized following the launch of a new version of its protocol. This led the SEC to begin an investigation into Stacks in June of the same year. However, Hiro Systems claimed it provided all the information required during the investigation.
"For 3+ years, we have provided all requested information and worked to explain how the Stacks network works, and Hiro's role as a developer tooling company," Ali said.
Many crypto community members highlighted the termination of the SEC's Stacks probe as a big win for the general crypto industry, considering it adds to a list of crypto investigations the agency has dropped in past months. The latest of these involved Paxos Labs' BUSD token, which was relieved of SEC suspicion following a "formal termination notice" that the company received on July 9.
Following the announcement of the SEC ending its investigation, the price of STX rose by 5%.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
Author
Michael Ebiekutan
FXStreet
With a deep passion for web3 technology, he's collaborated with industry-leading brands like Mara, ITAK, and FXStreet in delivering groundbreaking reports on web3's transformative potential across diverse sectors. In addi
