Less than a year after securing $133 million in a private placement from Bain Capital Ventures, GV, Stanley Druckenmiller, Kevin Warsh, Lightspeed, Foundation Capital, a16z, Wing VC, NFX Ventures, Valor Capital, Zhenfund, INBlockchain, Ceyuan, Sky9 Capital, U.S. crypto firm Basis has decided to shut down all operations.
Founded in 2017, Basis describes itself as a new cryptocurrency that has all the benefits of traditional cryptocurrencies such as privacy, anonymity, decentralized, but with a monetary policy build into the blockchain that keeps the price of each toke pegged to a stable asset. CEO and Founder of Basis, Nader Al-Naji, stated that while Basis was successful at securing the $133 million investment, published its own white paper, and assembled an outstanding team, having to apply U.S. securities regulations into the Basis system had a “series negative impact” on Basis’ ability to launch. Al-Naji explained:
“As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status for bond and share tokens (though Basis would likely be free of this characterization). 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.
“Enforcing transfer restrictions would require a centralized whitelist, meaning our system would not only lose its censorship resistance, but also that on-chain auctions would have significantly less liquidity. Having fewer participants in the on-chain auctions adversely affects the stability of Basis, making Basis intrinsically less attractive to users. Additionally, imposing transfer restrictions on bond and share token auctions materially hurts our ability to build the Basis ecosystem.
“While transfer restrictions can generally lapse 12 months after a security is issued, because the auctions of bond and share tokens governed by our monetary policy would be continuously issued, transfer restrictions and a centralized whitelist would be required indefinitely.”
Al-Naji went on to share that he and his team considered many alternative paths to launch to try and comply with the regulatory constraints while keeping our product compelling and competitive, which included launching offshore with added utility to make bond and share tokens less financial in nature, and starting off with a centralized stability mechanism. However, they didn’t believe any of the paths considered were compelling enough for the platform’s users or investors, or consistent enough with their vision to justify moving forward. Due to this decision, Basis will ultimately return capital to the platform’s investors and will be shutting down. Al-Naji then added:
“Although this isn’t the outcome any of us wanted, we knew going into this that we were fundamentally making a binary bet on a favorable regulatory landscape. The binary nature of our bet is precisely why we included a return of capital clause in our token sale to begin with, even though it was something we hoped we’d never have to rely on. So, while we’re disappointed we couldn’t launch the system we were all hoping to build, we’re thankful that we can at least do right by our investors given these circumstances.”