Basis, a stablecoin startup, has collapsed. With concerns over U.S. securities regulations, the company has decided not to proceed with its new coin, which would have added to the myriad stablecoin projects to hit the crypto markets over the past few months.
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Backed By the Big Boys, Basis Still Saw Problems Ahead
Basis was backed by heavyweight venture capital firms Andreessen Horowitz, Bain Capital Ventures, Lightspeed Ventures, and Google’s GV. After raising a whopping $133 million USD, the company has determined that the regulatory landscape would not be conducive to success. It is returning money to its investors.
The company that created Basis, which planned the stablecoin called basiscoin, Intangible Labs, decided to nip the project in the bud before getting started. The company’s whitepaper included a “return capital clause”, requiring it to refund its investors should its project fail.
Regulators Consulted, Their Silence Was Deafening
Intangible Labs underwent lengthy consultations with the SEC and was never told it would be securities compliant or otherwise. However, it appears CEO Nader Al-Naji read the writing on the wall, telling Forbes:
“Returning capital is something I never wanted to have to do, and had the regulatory climate loosened rather than tightened it would have been amazing for our technology, and also for the people who would use it.”
Complicated Structure Would Have Limited the Coin to Accredited Investors
Basiscoin was not going to be pegged to a fiat or commodity, but rather rely on the Quantity Theory of Money used by Central Banks worldwide to stabilize and regulate the supply and demand of the coin.
The sophisticated algorithmic approach would have involved using a complex structure to keep the value stable. According to the company’s website:
“Basis remains stable by incentivizing traders to buy and sell Basis in response to changes in demand. These incentives are set up through regular, on-chain auctions of “bond” and “share” tokens, which serve to adjust Basis supply… Due to their status as unregistered securities, bond and share tokens would be subject to transfer restrictions, with Intangible Labs responsible for limiting token ownership to accredited investors in the US for the first year after issuance and for performing eligibility checks on international users.”
Al-Naji isn’t going anywhere soon, though, stating:
“You gave us the opportunity to change the world, and we’re looking forward to trying again. Until next time.”
Have your say. Did the world really need another stablecoin anyway?
Images via Pixabay
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