Hiro, formerly Blockstack, Says STX Token Is No Longer a Security

Hiro, formerly known as Blockstack, announced last week that its Stacks token (STX) is no longer a security, and as such, Hiro will stop filing annual reports to the SEC.

“Today, Hiro Systems PBC filed its 2020 annual report with the SEC,” Hiro CEO Muneeb Ali wrote in a blog post. “We expect this to be our last annual report filing, marking the end of a nearly two-year journey since Hiro’s SEC-qualified offering of Stacks tokens (STX) in July 2019.”

Of course, Hiro declaring STX no longer a security is not the same as the SEC saying it. But that’s the whole issue exemplified by Blockstack’s “journey”: there is no precedence for the SEC declaring a crypto token that was once a security no longer a security.

When asked by Decrypt, Ali declined to comment as to whether or not the company has discussed the legal status of STX tokens with the SEC. 

Blockstack made waves in the crypto industry in 2019 when it completed the first SEC-approved token sale, raising more than $23 million. But in the time since, some in the industry have wondered whether holding the SEC’s hand was worth it, as some other projects that didn’t play by the rules succeeded anyway. 

Hiro first announced in December that it would no longer be treating Stacks tokens as securities once the company’s Stacks 2.0 blockchain launched in January. But now the company has made it official with the SEC.

Previously, Stacks were treated as a security “out of an abundance of caution,” the company says. Now the company believes it has made good on its promise to decentralize the Stacks ecosystem, because the broader Stacks ecosystem has no central governing authority behind it. 

“If Hiro disappears, can the rest of the ecosystem function, or is there really a reliance on this company?” Ali said in conversation with Decrypt, adding that the ecosystem can indeed function without Hiro. 

Ali and Hiro are basing their argument on the Howey Test, the litmus test the SEC uses to determine whether a token represents a security.

The Howey Test and securities law

The Howey Test refers to a 1946 U.S. Supreme Court case involving shares in a citrus grove.

Under the Howey Test, an investment contract exists if there is an investment made “in a common enterprise with an expectation of profit derived from the efforts of others.” as former SEC official William Hinman explained at a Yahoo Finance event in 2o18. In the case of token sales, the investment is also marketed with “the promise that the assets will be cultivated in a way that will cause them to grow in value, to be sold later at a profit,”

Thus a central question of the Howey Test is determining whether one company or entity could reasonably be identified as the driver of potential financial returns.

Without the presence of this centralized entity, the transacted good is not considered a security. As Hiro believes it has decentralized the Stacks ecosystem, that centralized managerial role is absent, and so it has concluded Stacks are no longer securities.

“We’re proud of our regulatory path and hope that it can serve as a model for others seeking to innovate in the crypto industry,” Ali added. 

Looking to the future

STX tokens finally started trading in the U.S. in January.

OKCoin, a US-based crypto exchange, listed STX that month. Ali tells Decrypt that OKCoin “takes regulations quite seriously,” and “went ahead and listed STX on their own.”

Since the launch of the Stacks 2.0 blockchain, Ali doesn’t tend to spend much time working with exchanges. “Hiro now focuses on developer tools for Stacks,” he says, “and we don’t deal with exchanges.”

You can hear more from Muneeb Ali on stage at the Ethereal Virtual Summit on Thursday, May 6. 


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Telcoin (TEL) gains 300% after layer-2 migration to the Polygon network

The ability to send money to anyone, anywhere, at any time was one of the original motivations behind Bitcoin (BTC) that helped give rise to the expanding cryptocurrency ecosystem that exists today. 

Blockchain-based global remittance platforms are one sector of crypto projects that have evolved over time to help meet the needs of peer-to-peer money transactions, and Telcoin (TEL) is one such project that has made significant gains in 2021.

TEL/USDT 4-hour chart. Source: TradingView

Data from Cointelegraph Markets Pro and TradingView shows that the price of Telcoin has surged more than 4,100% since Feb. 1, rallying from a low of $0.00066 to a new all-time high at $0.0286 on May 5 as the altcoin saw a record $110 million in 24-hour trading volume.

Shift to global remittances ignite the rally

A scroll through the Telcoin Twitter feed shows that the project recently launched an upgraded protocol that enabled its remittance services between the Philippines and Canada to go live on Feb. 4.

The launch of V2 included new versions of both iOS and Android mobile applications that users in participating jurisdictions can download in the Apple and Google Play store.

According to the Telcoin team, Canada is the “first of four initial sending markets that Telcoin is entering for fiat remittances,” and it will soon be “followed by Singapore, Australia, and the USA.”

The project gained further attention in late February when Telcoin CEO Paul Neuner appeared before the Nebraska State Legislature to talk about opportunities in the fintech space and how the state could benefit from legislation geared toward turning Nebraska into a decentralized finance hub.

Layer 2 trading lifts TEL price to new highs

After trading sideways through most of March and April, TEL price received a dose of rocket fuel thanks to the token being listed on the QuickSwap decentralized exchange that operates on Polygon, a layer-2 protocol buil on the Ethereum network.

The lower fee environment of the Polygon network and the attractive yield opportunities for liquidity providers on QuickSwap likely led to the surge in trading volume for TEL.

According to data from Cointelegraph Markets Pro, market conditions for TEL have been favorable for some time.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. TEL price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for TEL was elevated following its launch on QuickSwap which initially elevated the price above $0.01. The score continued to rise and reached a high of 95 on May 3, roughly two days before the price rallied 84% to a new all-time high on May 5.

With a globally relevant use case now operating in a low fee, layer-2 environment, Telcoin has the potential to attract a wide range of global users. As blockchain technology increases its mainstream presence and new participants look for cheaper ways to transfer funds and make payments, TEL price could see further appreciation. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.