Research Summary
The Securities and Exchange Commission (SEC) has dropped investigations into Paxos Trust Company and Hiro Systems. Paxos was under investigation for the unregistered issuance of Binance USD (BUSD) tokens, while Hiro Systems was being investigated in relation to the Stacks Blockchain. Both companies have maintained that their operations are not securities under federal securities laws.
Key Takeaways
SEC Drops Investigations into Paxos and Hiro Systems
- Investigation into Paxos: The SEC has decided not to recommend enforcement action against Paxos Trust Company, which was under investigation for the unregistered issuance of Binance USD (BUSD) tokens. Paxos has always maintained that its USD-backed stablecoins are not securities under federal securities laws.
- Investigation into Hiro Systems: Similarly, the SEC has concluded its investigation into Hiro Systems, the primary developer of the Stacks Blockchain, and will not recommend enforcement action. Hiro Systems believes in the need for a clear regulatory framework in the US for developers of innovative open protocols.
Implications of the SEC’s Decisions
- Regulation by Enforcement Approach: The SEC’s decisions come after a series of attacks on its regulation by enforcement approach to crypto companies. The most recent attack was Judge Jackson’s ruling in the SEC v. Binance case, where the court ruled that the SEC failed to allege facts indicating that secondary market sales of BNB tokens on crypto exchanges were securities transactions.
- Impact on Crypto Companies: The SEC’s decisions could have significant implications for other crypto companies under investigation. It could potentially lead to a shift in the SEC’s approach towards crypto companies, moving away from regulation by enforcement.
Proofs and Protocols Blog
- Blog Launch: A new blog called Proofs and Protocols has been launched to discuss tech and law, with the aim of making each field more understandable for those outside of each field. The inaugural post analyzes the SEC’s allegations against Consensys and Coinbase, particularly focusing on wallet and swap functionalities.
- Critique of SEC’s Allegations: The blog post critiques the SEC’s allegations against Consensys that it acted as a “broker” through its MetaMask Swaps app, arguing that they are not aligned with the realities of how the technology functions.
Actionable Insights
- Understanding Regulatory Landscape: Crypto companies should closely monitor the regulatory landscape and the SEC’s approach towards crypto companies. This could help them better navigate potential regulatory challenges.
- Engaging with Regulators: Crypto companies should consider engaging with regulators to help shape policy and create a clear regulatory framework. This could potentially help avoid future regulatory issues.
- Staying Informed: Stakeholders in the crypto space should stay informed about legal and technical discussions in the field. Resources like the Proofs and Protocols blog can provide valuable insights.
