Basis stablecoin was one of the most popular and promising stablecoins over the past months. The project drove much attention and raised a total of $133 Million.
However, the project declared that it would be shutting down. Reports claim that the project will return most of the raised money to its investors. Among the project’s backers are Pantera VC, Google Ventures, DCG, MetaStable, a16z, and others.
The reason for the project shutting down seems to be regulatory issues after an initial attempt to launch its algorithmic stablecoin. The problems appear to be too complicated for the project’s team to solve, which is why Basis had to decide on shutting down the operation. It is currently not clear which regulatory agency has is the reason for this decision, or even what problems does the agency have with the token.
Basis also gave no previous hint of a project’s shutdown, and the announcement came with no prior notice. Basis itself is a non-collateralized algorithmic stablecoin, with its protocol implementing a second token known as ‘bond.’ This secondary coin needs to be purchased so that the primary one would have a stable value.
“Under the US laws, these secondary tokens are often classified as securities.”, as the situation was recently explained by Reserve CEO, Nevin Freeman.
It is interesting to note that stablecoins had received a lot of attention in 2018, due to the bearish market, maybe in anticipation for them to take the create crypto hype after the ICOs era of 2017.
The most famous stablecoin, Tether, has been a center of serious controversy, as it couldn’t prove that it holds enough money to back its circulating supply. Many took a liking to the idea of a stablecoin, including the Winklevoss twins, which is why many other stable projects emerged quickly.
Now that Basis is shutting down, experts warn that the situation is fragile and we could see more projects following Basis. Regulatory uncertainty, as big of a reason that it is, can often be only one of the reasons behind such outcomes.
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