Bain-backed crypto startup shuts down over securities laws

Bloomberg

The worst thing you can call a cryptocurrency project isn’t a “scam” — although many have been called that. It’s a “security.”
By casting digital assets in with stocks and bonds, the more stringent rules governing those traditional asset classes will be applied to cryptos. For proof of what that can mean for the nascent market, look no further than Basis, a high-profile project that is closing just eight months after raising
$133 million from the likes of Andreessen Horowitz, Bain Capital Ventures and Stanley Druckenmiller.
Basis, which created a digital asset known as a “stable coin” that’s intended to have minimal volatility, will return capital to its investors, Chief Executive Officer Nader Al-Naji said in a statement.
The Hoboken, New Jersey-based company’s lawyers concluded that secondary tokens it created to help ensure the stability of its stable coin would be designated securities by regulators, which in turn would reduce the number of potential buyers and jeopardise Basis’s success, said Al-Naji.
“The major trigger was realising there really wouldn’t be a way to escape security classification for our token,” Al-Naji said in a phone interview.
“That was a very negative finding.”
While the concept of a low-volatility cryptocurrency has been around since at least 2014, stable coins have been one of the hottest areas for crypto entrepreneurs in the past year, with as many as 120 projects in development.
A number of the projects, including Basis, Carbon, MakerDAO and Reserve, also feature equity-like secondary tokens that appreciate when usage of the underlying stable coins increases.
Basis planned to maintain stability by incentivising traders to buy and sell its stable coin in response to changes in demand.
This would be achieved by algorithmically adjusting supply of its stable coin via a complex model using three tokens.