In the face of reported regulatory headwinds, the highly funded Basis stablecoin project has apparently decided to call it a day.
Back in April, we reported on the incredible success of the Basis in generating over $130m-worth of private funding for its algorithmically controlled stablecoin project.
Under the control of an entity known as Intangible Labs, run by three Princeton University graduates, Basis touted its ability to hold a stable value over time by allowing its own internal Ethereum-powered smart contracts control its supply and thus peg its value. The system was the brainchild of Nader Al-Naji, who first floated the principle under the moniker ‘Basecoin’ in a blog.
In a section called ‘Bitcoin’s problems and the innovations that solved them’, Nader posited that Bitcoin’s fixed supply resulted in “changes in demand [that] result in wild swings in the prices of everyday goods, and this churn ultimately results in extreme losses in overall economic productivity,” before stating that “Most modern economists believe that you can prevent such spirals, and therefore ‘optimise’ the amount of economic activity by manipulating the money supply.”
When we first reported on Basis back in April, we commented that its plan to dynamically control money supply – or at least maintain the algorithms that would do that job, was something likely to attract “ire from certain quarters of the cryptocurrency community that instinctively shuns such interventionist policies,” however, according to reporting by The Block, it is regulators that have been the problem as much as some of the more ideologically driven elements of the crypto community.
Despite – at the time of writing – there being no notable changes to its website reporting the move, nor announcements via the Twitter accounts @basisprotocol or from Al-Naji’s personal account, The Block’s “multiple people with direct knowledge of the situation” tell it that in the face of regulatory issues, the project is to close with the majority of the capital it raised to be returned to investors. It is unclear exactly which regulator has issues with Basis’ proposal, nor what the issue pertains to, though presumably some indication of that will be given when formal announcement is made – a move that is expected imminently. It is unlikely – in the light of recent SEC action relating to several ICOs – that concerns will be related to the way that the money behind basis was raised; Basis was only ever an option for accredited investors, and was never the subject of a the kind of token sale that is now beginning to draw legal action.
So, unless future plans for funded relied on a mechanism that its founders believed would immediately put it in conflict with the SEC, it is more likely to be some issue with its control over the money supply, and thus the value of Basis that has attracted comment.
The shutdown has a somewhat ironic edge to it, considering that Stablecoins have been one of the growth areas in crypto during that latter part of 2018. While Basis seemed ahead of the curve in moving in that direction back in April, others have since leapfrogged it to market with much simpler models in the wake of concerns surrounding the ‘Hoover’ of the coin type, Tether.
It is also surprising, considering the Basis project boasted a pretty glittering array of backers, with Andressen Horowitz; Google’s venture investment arm, GV; hedge fund manager Stan Druckenmiller; former Federal Reserve Governor Kevin Warsh and Polychain Capital just some of the names that pumped cash into its coffers. The success of the very venture capital-friendly team – that also included by ex-Googler, Lawrence Diao, and machine learning expert Josh Chen (who, like Al-Naji, graduated summa cum laude in Computer Science from Princeton – propelled its figurehead on to the Forbes 30-under-30 Technology list a few weeks ago.