As per news reports, the US-based stable cryptocurrency project Basis is set to close its operations and subsequently refund the investors.
The news source states that the information has been gained from individuals close to the project and that the stablecoin project will return most of the USD 133 million that it had raised during a private funding round in April 2018. The investor’s in Basis’s stable, algorithmic cryptocurrency protocol include some of the biggest names in the industry such as Andreessen Horowitz and Bain Capital Ventures.
Nevin Freeman, the CEO, and Co-Founder of another stablecoin project called Reserve has commented on Basis’s shutdown saying that the move could be a result of the regulatory concerns that have surrounded one of the token types issued By Basis.
According to Freeman, the protocol of Basis deploys a secondary token called the ‘bond token.’ This token is required to be purchased to keep the stable peg in place. Freeman elaborated on the matter saying that such secondary tokens are considered securities under the regulatory framework laid out by the SEC.
“Since there is only a small set of people who can legally buy these ‘share’ or ‘bond’ 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 stay broken.”
Freeman is the right man to comment on the situation as the stablecoin project Reserve headed by him completed a funding round in 2018. Reserve is backed by well-known investors such as Distributed Global, Peter Thiel, and Coinbase Ventures. He disproves the theory that other stablecoins may suffer the same fate as Basis by mentioning that some stablecoin projects can include ‘share tokens’ as long as they are not the source of capital.
2018 has witnessed the emergence of many stablecoins which surged in popularity in the past few months. Major cryptocurrency exchanges such as OKEx and Huobi added the four major stablecoins, namely True USD (TUSD), Paxos (PAX), USD Coin (USDC), and Gemini Dollar (GUSD), to their platforms in October.