Crypto suffers a black eye after a buzzy $130 million project crumbles

The cryptocurrency industry has had a wild, peak-to-valley year. Case in point: The news today that Basis — one of Silicon Valley’s buzziest attempts to create an alternative to traditional currency — is shutting down.

Basis said it raised $133 million just this April from blue-chip venture capitalists like Andreessen Horowitz and Alphabet’s GV. That shocking amount of dough was meant to build a “stablecoin” — or a currency that would be insulated from inflation — and to try and prevent the price sensitivity that has bedeviled other cryptocurrencies.

But Basis felt the project would really only work if its tokens, or what Basis created to adjust the supply of its stablecoin and therefore keep its value relatively stable, wouldn’t be subject to U.S. securities laws. Regulators have been trying to assess whether to apply standard laws that govern things like stocks to digital assets like coins — and Basis said it was reading the tea leaves and predicting a crackdown.

“Unfortunately, having to apply US securities regulation to the system had a serious negative impact on our ability to launch Basis,” its CEO Nader Al-Naji wrote Thursday.

But at a bigger-picture level, this is a black eye for the entire cryptocurrency industry. As the amount of money it raised makes clear, Basis was seen as being at the vanguard of the cryptocurrency revolution. And while the company says it is returning the money it raised to its investors, it’s nevertheless a very public stumble for its prestigious backers.

Of course, crypto investing — just like startup investing — produces lots of failures. That’s normal. But this particular failure also is a reminder why some Silicon Valley investors shied away from investing in crypto projects such as initial coin offerings in the first place: The regulatory landscape is just too uncertain to be able to predict much of anything.

Basis’ demise was first reported by The Block.

This article originally appeared on Recode.net.

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