The US Securities and Exchange Commission (SEC) has recently closed two high-profile investigations into the cryptocurrency sector without taking enforcement action.
These cases involve Hiro Systems, the developer of Bitcoin's L2 blockchain, Stacks, has already Paxos, the issuer of the BUSD stablecoin.
The SEC’s recent decisions, which notified both cryptocurrency firms of the closure of their respective investigative cases, mark a significant victory for the cryptocurrency industry in its long-running battle with federal regulators.
The cryptocurrency community celebrates two new victories
Hiro Systems, formerly known as Blockstack, is the developer of the Bitcoin scaling and smart contract blockchain Stacks. The company had been under SEC scrutiny for the past three years, having raised $70 million in token sales between 2017 and 2019. The fundraising attracted the attention of the securities regulator, which launched an investigation into the potential sale of unregulated securities.
However, according to a Valid identity document recently introduced, The SEC has decided to close the investigation and not recommend enforcement actions. against the Stacks developer.
“Based on the information we have to date, we do not intend to recommend enforcement action by the Commission against Hiro Systems PBC, formerly known as Blockstack PBC.”, the regulator said.
The SEC's enforcement division's decision represents a significant relief for the company and the broader cryptocurrency community.
Hiro System welcomed the recent victory, emphasizing that the United States must establish a proper regulatory system for blockchain technology builders, in order to provide a safe and healthy path for further advancement towards the innovation of new technologies.
Similarly, Paxos, the issuer of the BUSD stablecoin, received a formal notification from the SEC on July 9, which also reported the end of the ongoing investigation that the securities regulator was carrying out.
The SEC had been investigating Paxos since February 2023, when it sent the stablecoin firm a Wells Notice arguing that BUSD was an investment contract and therefore an unregistered security.
Cryptocurrencies and stablecoins move towards legitimization
Walter Hessert, Paxos' chief strategist, expressed relief at the SEC's decision to rescind its investigation and not recommend enforcement action against the company.
In a recent interview with Fortune, Hessert said that the closure of the regulator's investigation was what Paxos had hoped for all along, and that This decision should help create more certainty in the cryptocurrency market in the country..
Both SEC decisions, on Hiro System and Paxos, come at a time when the regulator has suffered several legal setbacks in cases involving cryptocurrency companies. For example, in July last year, a federal judge ruled in the SEC vs Ripple case that the XRP token was not a security as far as sales on exchange platforms were concerned. More recently, in June 2024, another judge cited this ruling in the SEC case against Binance and dismissed similar claims related to BUSD.
In addition to closing the ongoing investigations into Hiro System and Paxos, the US securities regulator also sent a notice to ConsenSys, the developer company of Infura and MetaMask, to notify about the closure of the investigation that was being carried out against the Ethereum network, since implementing The Merge upgrade and transitioning to the Proof of Stake consensus protocol.
According to experts, the closure of these investigations without enforcement measures could signal a shift in the SEC’s regulatory approach to cryptocurrencies. While the agency maintains its hawkish stance, arguing that many tokens and cryptocurrencies can be classified as unregistered securities, these recent decisions suggest a greater willingness to consider the complexities and nuances of the crypto space. All of this comes amid the U.S. presidential candidates’ race in an environment where cryptocurrencies and digital assets are gaining greater relevance to voters.
