Cryptocurrency stablecoin Basis will close and return most of its funds to investors, as reported by The Block.
According to “multiple people with direct knowledge of the situation,” the stablecoin project will return the majority of the $133 million raised in funding back in April. Some of Basis’s investors were prominent figures in the venture capital space, with the likes of Bain Capital Ventures and Andreessen Horowitz both pledging their support.
Regulatory issues have been cited as the reason behind the project’s closure. One of the regulatory hurdles Basis reportedly couldn’t pass was surrounding their “secondary token” or “bond token”, which could be seen as a security under US law.
Rumors that @basisprotocol (Basecoin) is winding down and returning funds to investors. Basis raised 133mill & was the hyped algo stablecoin of the year. Backers included: a16z, Bain, DCG, MetaStable, Pantera, PolyChain, Lightspeed and Google Ventures. Let's go over red flags pic.twitter.com/emSv1oICDa
— 朱溯 🐂 (@zhusu) December 13, 2018
Co-founder of competing stablecoin project Reserve told CoinTelegraph: “Since there is only a small set of people who can [legally] buy these ‘share’ or ‘bond’ [unregistered] security tokens, protocols based on this mechanism may be at risk — if nobody wants to buy these tokens when the stablecoin is trading below the pegged price, the peg will just stay broken.”
Stablecoins have been a hot topic in the cryptocurrency space over the past year in light of the flailing price of cryptocurrencies. USD-Tether came under intense scrutiny over their reluctance to publish an audit to prove they had sufficient funds to back their stablecoin. A number of other tokens like Gemini Dollar and Paxos have been issued in order to compete in the space.
Another project that built up an impressive following in the past year is MakerDAO with their Dai stablecoin. Dai draws parallels with Basis as the Maker project have a token themselves as well as the Dai stablecoin, which could potentially be viewed as a security by the SEC.
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