Kopalnie Krypto Team - Wednesday 1 March 2023
Is XCH a security? Chia Network on its way to the stock exchange
Gene Hoffman, the CEO of Chia Network, has stated that the XCH token is not a security. He emphasized that the company is trying to register with the U.S. Securities and Exchange Commission (SEC). XCH is the primary coin that powers the first layer of the Chia Network blockchain.
The statement by Gene Hoffman is also a response to the comments made by Gary Gensler, the Chairman of the SEC. On February 25, 2023, Gensler declared that all cryptocurrencies, except for Bitcoin, are securities. He also added that behind each asset in the cryptocurrency space, there is a team trying to introduce their tokens to the market and persuade investors to buy them. According to Gary Gensler, the only exception to this rule is Bitcoin.
Quoting the SEC Chairman:
"Behind these cryptocurrencies are people using a set of complicated and legally opaque mechanisms. However, it all comes down to promoting their tokens and enticing investors."
Gary Gensler based his line of thinking on the Howey Test. According to this test, a token can be considered a security if funds are invested in a community project, with the expectation of reaping benefits from collective efforts. However, many financial lawyers have refuted this claim, stating that Gensler's statements and opinions do not carry legal weight. It is worth noting that Chairman Gensler assumed that all digital assets, except for Bitcoin, are securities. According to lawyer and Director of Policy at the Blockchain Association, Jake Chervinsky, this assumption is not legally binding.
Continuing from Jake Chervinsky's statement:
"The SEC does not have the authority to regulate any digital asset until it proves its case in court. It would have to do so individually for each asset, one at a time."
In response to Gary Gensler's remarks, Gene Hoffman, the CEO of Chia Network, stated that XCH, the company's native token, is not a security. He assured that Chia tokens (XCH) were never publicly offered for sale, which is a requirement for securities classification under the Howey Test. He also announced that the project intends to register Chia shares with the SEC to operate legally. If successful, the Chia coin (XCH) will become the first token to achieve this registration.
Hoffman explained that the Chia situation differs from Ripple. Here, he referred to former Ripple developer, Matt Hamilton, who claimed that registering capital will not save Ripple from SEC scrutiny. According to Gene Hoffman, selling XRP before registering Ripple's shares was a mistake.