As reported by The Block earlier today, the Basis stable coin project is to cease operations and start the process of returning money to investors. The surprise news will mean that one of the most funded stable coin projects in recent times has failed to keep its head above water, and the $133 million that the project raised will be sent back to its original owners.

The main concern that has led to this decision is that Basis was not going to be able to avoid being classified as a security by the US Securities and Exchange Commission. Founder Nader Al-Naji issued a blog post today, explaining the issue as follows:

“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 with a centralized stability mechanism. 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.”

Unfortunately for Basis, this would mean that the coin would be only available to investors and would be subject to rigorous KYC. Interestingly though, this is not a decision that has been forced upon the firm by the SEC – or at least not quite yet. Instead, the company has decided on its own, despite being one of the most hyped and best-funded stable coin projects in the world.

The main draw to Basis was that it wasn’t pegged to a currency. Instead, it used an algorithm to keep the price stable by purchasing Stablecoins itself when the price falls and releasing more when it rises, ensuring that the supply to demand ratio is always the same. The idea has attracted a lot of praise and the investment of industry bigwigs like Andreessen Horowitz.

This development will be seen as something of a surprise within the world of crypto, with many predicting that stable coins would be the next big thing for 2019. In fact, the CEO of the XBTO Group, Phillippe Bekhazi, told Coindesk,

“They can also be used as a mechanism to move value around in stable terms, and technically even for payments, although the speed of the underlying blockchain may be a limiting factor for time-sensitive transactions, for the time being.”

But with the termination of the Stablecoin project and ongoing scrutiny and criticism being leveled at Tether, about whom there is serious doubt when it comes to the supposed 1:1 USD pegging, the market has suddenly become a lot less certain. And at a time when uncertainty is rife due to falling crypto prices, this may serve to spook investors even further.