Gene Hoffman, the CEO of Chia Network, asserted that the XCH token is not a security and that the company is attempting to register with the U.S. Securities and Exchange Commission (SEC). XCH is the flagship coin that drives the Chia layer-1 blockchain network.
This was in response to a recent comment made by Gary Gensler, the chair of the SEC, on February 25, in which he claimed that all cryptocurrency tokens other than Bitcoin are securities. The regulator and cryptocurrency skeptic said that, aside from Bitcoin, every other crypto asset has a project team working to market the tokens and persuade investors to buy them.
Gary Gensler said,
“There are people behind these cryptocurrencies using a variety of complex and legally opaque mechanisms, but at the most basic level, they are trying to promote their tokens and entice investors.”
He based his reasoning on the Howey test. According to this test, a token qualifies as security if funds are invested in a community project with a reasonable expectation that rewards will flow from collective efforts.
However, many finance attorneys have refuted this assertion, stating that Gensler’s statements or opinions lack legal standing.
Notably, Chair Gensler may have assumed that all digital assets other than bitcoin (BTC) are securities, but that assumption is not binding on the law, according to the lawyer and chief policy officer of the Blockchain Association, Jake Chervinsky.
Chair Gensler may have prejudged that every digital asset aside from bitcoin is a security, but his opinion is not the law. The SEC lacks authority to regulate any of them until and unless it proves its case in court. For each asset, every single one, individually, one at a time.
— Jake Chervinsky (@jchervinsky) February 26, 2023
He continued,
“The SEC lacks authority to regulate any of them until and unless it proves its case in court. “For each asset, every single one, individually, one at a time.”
Chia (XCH) Coin Will Register With the SEC
Chia Network CEO Gene Hoffman stated that “XCH,” the company’s native token, is not a security in reaction to remarks made by Gary Gensler, the SEC chairman. He claimed that Chia (XCH) had not been publicly offered for sale, which is a requirement for classifying securities under the Howey Test.
XCH is not a security. We’re going in to register Chia equity. Which is the obvious way to be legal that everyone else just doesn’t want to do.
— Gene Hoffman hoffmang.xch 🌱 (@hoffmang) February 27, 2023
He further stated that in order to operate legally, the project intends to register Chia stock with the SEC. If this occurs, the Chia (XCH) coin might become the first of its kind to do so.
Hoffman clarified that Chia’s situation differs from Ripple’s when former Ripple developer Matt Hamilton claimed that registering equity did not protect Ripple from the SEC’s scrutiny.
Gene Hoffman asserted that,
“They [Ripple] sold XRP before they registered Ripple stock, and that was the mistake.”
