Chia Network cut a third of its workforce today as the blockchain platform sought to reestablish a lost banking relationship, the company told CoinDesk, further delaying what Chia had hoped would be a rapid path to listing as a public company.
The open-source software business, which had prided itself on seeking a U.S.-compliant route to establishing its listing on a U.S. exchange, informed 24 of its 70 employees today that their jobs were ending. That move comes five months after Chia, which was founded by BitTorrent inventor Bram Cohen, filed with the Securities and Exchange Commission (SEC) to start its process to go public – a situation partially derailed by the collapse of its bank, Credit Suisse.
“Unfortunately, we’re going to lose some great people as we’ve endured a challenging funding environment over the past several months,” said Chia CEO Gene Hoffman, who said the layoffs are focused more on “ecosystem support” than sales and marketing. “It was a difficult decision to give the company the runway it needs.”
While the crypto company slashes its staff, it’s also looking to sell from its stockpile of its own token, XCH, Hoffman said. That mountain of 21 million XCH represents almost three quarters of the supply of those coins, with nearly 9 million in current circulation, but Hoffman said the company would only unload a limited amount as a backup source of funding on the runway to its initial public offering (IPO).
“Certainly, we’re not going to be selling even a material amount,” Hoffman told CoinDesk in an interview.
Under its structure, Chia has an unencumbered 2.6 million XCH it can easily unload, which would be worth $70 million at the current price, though that value would inevitably be affected by large-scale selling.
Chia had never sold any of its tokens because of uncertainty over how the SEC would classify them, but Hoffman said recent court cases involving Ripple and Terraform Labs have demonstrated that a carefully decentralized token can satisfy current standards for defining a digital commodity.
On the IPO front, Hoffman said the company, which has been working with the World Bank and has tokenized carbon credits, secured a new banking relationship with a U.S. institution at the end of last week. He declined to identify the bank, citing the preliminary stage of the SEC negotiations.
Even with a new bank on board and reduced expenses, Chia faces an uncertain process with the regulator, which has been combating several other crypto firms in federal court.
While much of the industry is waging an open legal war with the agency, Chia has tried to walk a tightrope to meet U.S. regulators’ expectations. That puts the layer-one provider somewhere in the no-man’s-land between Prometheum Inc., a controversial startup seeking to establish itself as an SEC-approved trading firm, and most of the rest of the crypto industry that insists the regulators are making it impossible for digital assets businesses to comply.
“Our interaction with the SEC has been quite normal, which is saying something in this space,” Hoffman said, adding that it’s difficult to predict how long the process will take. “We’ve expected it’s going to take a little longer than average to get through the SEC for somebody like us.”
The SEC had previously approved Coinbase Inc.’s effort to go public, though it eventually followed up with an enforcement action accusing it of violating securities law as an unregistered exchange.
The regulator may also run into its own delays as it faces a potential shutdown of the federal government caused by a congressional impasse over the U.S. budget. Chia’s filing would be in the hands of a “skeletal staff” if that happens, according to testimony this week from SEC Chair Gary Gensler.
