Chia Network Faces Setbacks Amid Staff Reductions and Banking Changes
Chia Network has joined the growing list of cryptocurrency companies reducing their workforce, citing a significant delay in its plans to go public due to the loss of its banking partner, Credit Suisse. Although the company announced the acquisition of a new banking partner last week, it remains uncertain how long the Securities and Exchange Commission (SEC) will take to assess its public listing request.
Workforce Reduction as a Strategic Move
In a bid to restore its banking relationships, Chia Network has laid off over a third of its employees, as confirmed by the company to CoinDesk. This decision comes as the blockchain platform aims to navigate a challenging funding landscape and prolong its timeline for a public listing. The company, known for its open-source software and compliance with U.S. regulations, informed 26 of its 70 staff members that their positions were being terminated. This restructuring follows a filing made five months ago with the SEC to initiate its public offering, which has been complicated by the collapse of Credit Suisse, its previous banking partner.
CEO Comments on Layoffs and Financial Strategy
Chia CEO Gene Hoffman expressed regret over the layoffs, acknowledging the loss of valuable team members amidst difficult funding conditions. He emphasized that the layoffs were aimed at “ecosystem support” rather than sales and marketing, describing the decision as tough but necessary to provide the company with the required runway for its operations.
Token Sales as a Backup Funding Source
Simultaneously, Chia is contemplating selling a portion of its substantial reserve of its native token, XCH, which comprises around 21 million tokens—approximately 75% of the total supply. While nearly 9 million tokens are currently in circulation, Hoffman stated that the company would only consider selling a limited quantity to support its initial public offering (IPO). He reassured stakeholders that they would not conduct a significant sale that could adversely impact the market.
Market Impact and SEC Classification Challenges
Chia has yet to market any of its tokens due to regulatory uncertainties surrounding their classification by the SEC. However, Hoffman referenced recent court rulings involving Ripple and Terraform Labs, which suggest that a well-decentralized token could potentially meet the criteria for being classified as a digital commodity. Following the announcement of layoffs, the price of XCH witnessed a decline of approximately 2.3%, dropping to $27.18 from its earlier trading peak.
New Banking Partnership and Regulatory Hurdles
On the IPO front, Hoffman indicated that Chia has established a new banking relationship with a U.S. institution, although he refrained from disclosing the bank’s name due to the ongoing discussions with the SEC. Despite this development, the company still faces an unpredictable regulatory process as the SEC continues to challenge several cryptocurrency firms in court.
Navigating Regulatory Expectations
In an industry rife with legal conflicts with regulators, Chia has sought to comply with U.S. expectations. This approach positions the company in a complex space, balancing between the controversial Prometheum Inc., which aims to secure SEC approval for trading, and the broader crypto sector, which contends that regulatory hurdles are stifling business operations. Hoffman noted that their interactions with the SEC have been relatively standard, albeit the timeline for approval remains uncertain and may extend beyond typical durations.
Potential Government Shutdown Complicates SEC Processes
Historically, the SEC has allowed companies like Coinbase Inc. to pursue public offerings, only to later allege violations of securities laws. The regulatory body may also experience its own delays due to the looming threat of a federal government shutdown triggered by budget disputes in Congress. In such a scenario, Chia’s pending application could be handled by a significantly reduced SEC workforce, as noted by SEC Chair Gary Gensler in a recent statement.
