Basis, the most well-funded stablecoin startup, has confirmed that it is shutting down and returning all of its remaining funds to investors.

The company realized that the regulatory landscape was too unfavorable to launch the project, according to an interview published today in Forbes. The startup’s move to return funds to investors was first reported by crypto news site The Block.

Originally called Basecoin, Basis had secured $133 million in funding to build an algorithmic stablecoin. Its founder, Nader Al-Naji, frequently described the project using code to maintain price stability for its token in the same way the U.S. Federal Reserve does for the dollar.

In a blog post today, Al-Naji wrote:

“As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status for bond and share tokens (though Basis would likely be free of this characterization).”

“We considered many alternative paths to launch to try and comply with the regulatory constraints while keeping our product compelling and competitive, including launching offshore, and starting off with a centralized stability mechanism,” Al-Naji explained in the post. “Ultimately, however, we don’t think any of the paths we considered are compelling enough for our users or our investors, or consistent enough with our vision to justify moving forward.”

In particular, he noted that its bond and share tokens, used to expand and contract the supply of tokens in order to maintain a price peg, would have to follow rules limiting it to accredited investors and requiring know-your-customer and anti–money laundering checks.

A source with knowledge of the matter told CoinDesk that Basis was bound by the terms of its simple agreement for future tokens (SAFT) and very conservative legal guidance. Unlike typical equity agreements, the SAFT that Basis used left little room for pivoting, and counsel offered little support for other options.

That said, the source pinned the blame on Basis’s particular agreements rather than any broad-based condemnation of stablecoins by U.S. regulators. No official communication was ever made by the U.S. Securities and Exchange Commission, the source explained. The team came to this conclusion on its own, CoinDesk was told.

Backed by not only some of the biggest names in crypto, Basis found support from some of the biggest names in venture capital. Investors included Andreessen Horowitz, Bain Capital Ventures, Lightspeed Ventures and GV (originally Google Ventures).

Salil Deshpande of Bain Capital Ventures expressed appreciation for the company’s decision, telling CoinDesk:

“At a high level, their bond tokens had to be classified as securities, which meant they’d need to restrict transfers and do accredited investor checks using a centralized whitelisting system. That was totally at odds with the concept of a decentralized independent stablecoin.”

Andreessen Horowitz was not immediately available for comment.

In a report on the stablecoin industry released in September, Blockchain noted that the company had by far the most open positions listed of any of the leading stablecoin projects, showing 22 in that report.

Hiring plans at Basis were fueled by its generous funding. At the time, the company took credit for bringing new institutions into a vision of decentralized finance.

“I think we were able to convert a lot of institutions into understanding the full scope of crypto more broadly,” Al-Naji told CoinDesk at the time.

In an announcement on the company website, Al-Naji wrote today:

“Although this isn’t the outcome any of us wanted, we knew going into this that we were fundamentally making a binary bet on a favorable regulatory landscape.”

Updated with additional information.

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