Stablecoin Startup Basis Shuts Down Eight Months after Raising $133 Million
According to an article published by Bloomberg, on December 13, 2018, Basis, a stablecoin startup funded by the likes of Bain Capital Ventures, and Andreessen Horowitz has decided to call it a day due to the persistent ambiguity regarding classification of digital currencies as securities.
Crypto Industry in Dire Straits
Since November 2018, the cryptocurrency industry has been on a continual downturn. Total market cap of the sector has plunged from $205 billion on November 1, 2018, to $102 billion on December 15.
As if the declining prices weren’t detrimental enough, financial watchdogs in the U.S. have made the crypto ecosystem more suffocating for the startups. The U.S. Securities and Exchange Commission (SEC) has, on numerous occasions, made it clear that the securities laws should apply to the majority of the cryptocurrencies.
Being classified as security immensely affects the decentralized nature of crypto, as it would entail the imposition of the stringiest rules and regulations of the traditional assets classes to the emerging one.
This is one of the primary reasons why Basis, a high-profile project which raised $133 million during its funding round has decided to call it quits just after eight months. The startup had launched a stablecoin to minimize the price volatility generally associated with cryptocurrencies. However, due to the lack of clarity regarding regulations, Basis CEO, Nader Al-Naji, confirmed on December 13, 2018, that the company would return the capital to its investors.
Al-Naji stated that the unavoidable designation of Basis’s stablecoin as securities would eventually reduce the number of potential buyers and hamper the firm’s success. He added:
“The current way in which regulators are viewing how securities regulation applies to tokens is generally onerous for anyone trying to build a decentralized network. At its core the decentralized nature of most cryptos is fundamentally incompatible with them being securities.”
Industry Continues to Cut down its Business
It’s worth highlighting that although the SEC has suggested in the past that it doesn’t consider bitcoin and ether to be securities, many tokens issued as part of ICOs could be regarded as securities. Classification of cryptocurrencies as securities would vastly limit the number of eligible buyers and require the firms to make some mandatory disclosures, a couple of points which run against the idea of decentralization.
The market cap washout has adversely impacted a large number of players in the crypto ecosystem. BTCManager reported on December 10, 2018, how the prolonged bear-market had forced companies like ConsenSys, Steemit, and SpankChain to cut down on their staff.