Basis, a crypto startup and once a high profile project which had bagged $133 million from top VCs announced that it is shutting down and also returning the money to investors. According to the report, it was an N.J-based cryptocurrency project which was started eight months ago and was working on ‘stable coin’. In fact, there was a lot of hype and interest it captures from the investors.
No Ways To Escape From Security Classification
Ventures capitalists that lend funds to this project was one-time Federal Reserve governor Kevin Warsh, longtime hedge fund manager Stan Druckenmiller, Digital Currency Group, NFX Ventures, Valor Capital, Bain Capital Ventures, GV, WingVC, Ceyuan, Andreessen Horowitz,one-time Lightspeed Venture Partners, Zhenfund, Sky9 Capital, Foundation Capital, and other
A note mentioned on its officials website states as follows;
Unfortunately, having to apply US securities regulation to the system had a serious negative impact on our ability to launch Basis.
The basis was the brainchild of Nader Al-Naji who started it with former Princeton classmates Lawrence Diao and Josh Chen. However, the key reason behind closure is that the firm is unable to cope with the security status of token imposed by the U.S regulators. In fact, Basis founders also mentioned that they cannot assume what regulatory frameworks regulators may roll in future and henceforth its technology roadmap and regulations didn’t mix.
CEO Al Naji said that “enforcing transfer restrictions would require a centralized whitelist, meaning our system would not only lose its censorship resistance, but also those on-chain auctions would have significantly less liquidity.”
He writes that since their token is not registered as securities yet, they realized ‘there is no reason to escape from the regulations”. He went on to say that;
“due to their status as unregistered securities, bond and share tokens would be subject to transfer restrictions, with [Basis] responsible for limiting token ownership to accredited investors in the U.S. for the first year after issuance, and for performing eligibility checks on international users.”
These processes would result in a ‘fewer participants’ within a platform and thus affect the stability of Basis’. He asserted that ‘it modifies the whole point’ here. However, many things are still unclear about basis platform as to investors didn’t respond yet. Stay tuned with Coingape to know more about this.