Basis, a stablecoin project founded in 2017 that was on the verge of launching, has had to cease operations and return $133 million to investors after the creators realised that it would be classed as a security offering under SEC guidelines. The Basis team posted a message on the project’s website announcing that, despite attempts to find alternative ways of delivering the project in line with his ideals, they had been left with no choice but to close it down:
We considered many alternative paths to launch to try and comply with the regulatory constraints while keeping our product compelling and competitive. These paths included launching offshore with added utility to make bond and share tokens less financial in nature, and starting off with a centralized stability mechanism. Ultimately, however, we don’t think any of the paths we considered are compelling enough for our users or our investors, or consistent enough with our vision to justify moving forward.
The SEC’s Growing Influence
Basis was to have been another in the plethora of stablecoins, but instead of being pegged to the dollar it was going to use an algorithm that would buy and sell stablecoins in line with price changes that would ensure it maintained a constant equilibrium. Basis had attracted praise from the likes of Andreessen Horowitz, and so the collapse of the project may come as a shock to some.
With the SEC clamping down on many aspects of crypto however, and in particular ICOs, projects that started off without bearing securities regulations in mind will have to find ways around them. Ignore this at launch and said projects risk SEC sanctions or potential closure, as in the case of Basis.
Founder Laments Tightened Regulations
Basis founder Nader Al-Naji, who was named in the Forbes 30-under-30 2019 list for his work behind the Basis token, has since spoken about the decision to shut down the project, stating that “…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.”
According to Al-Naji, after eighteen months work Basis was awaiting a green light from regulators, but this green light quickly turned to a red one, causing him to hit the ‘refund’ button, something he “never wanted to have to do”. With the SEC seeming to gain a stronger grip almost daily within the crypto world, this will certainly not be the last project that sees time, money, and effort go to waste at the risk of being labelled a security down the road.