Chia Network CEO, Gene Hoffman, has stated that Chia’s native token, XCH, is not a security and therefore does not require registration with the US Securities and Exchange Commission (SEC). However, the company is planning to register Chia equity with the SEC to ensure its operation is legal.
SEC Chairman Gary Gensler recently commented that “everything other than Bitcoin is a security”. And also argued that tokens require promotion and enticement by a project team to investors.
The Howey Test considers a token to be a security if there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.
In response, Hoffman explained that XCH had not been sold to the public, which is a necessary condition for classifying securities based on the Howey Test.
He further stated that the XCH token is designed as a payment method. Moreover, its value is driven by the cost of producing plots of land for storage.
Others’ efforts develop and promote securities, while this drives their value. Former Ripple developer, Matt Hamilton, cautioned that registering equity did not prevent the SEC from taking legal action against Ripple.
Hoffman countered that Chia’s case is different from that of Ripple, which sold XRP without a registration statement. Hoffman said:
Selling a token without a registration statement around may convert a token into security. So don’t sell them before there is a registration statement.
The Future of XCH
Looking to the future, Hoffman believes that XCH will have a significant role to play in the cryptocurrency market, given its unique design and focus on environmentally-friendly mining.
XCH is mined using proof of space and time. In addition, which requires significantly less energy compared to the proof of work used by Bitcoin and other cryptocurrencies.
Hoffman argues that XCH’s energy efficiency and the company’s commitment to using renewable energy will attract investors concerned about the environmental impact of mining.
In addition, Chia Network is developing a decentralized exchange that will allow for the exchange of XCH with other cryptocurrencies. Further increasing its utility and appeal to investors.
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In conclusion, Chia Network CEO, Gene Hoffman, argues that XCH is not a security. Therefore, the company plans to register Chia equity with the SEC to ensure compliance with US securities laws.
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
Despite this, Hoffman believes that XCH’s unique design and focus on environmentally-friendly mining will attract investors. In addition, making it a significant player in the cryptocurrency market.