The evening of December 14th, Basis issued a stable currency community open letter, announced that due to regulatory pressure, the current “has decided to return capital to investors”, will also be closed Basis project, confirmed the day before the return of the outage rumors.
Where the former reports leave the regulatory pressure from the problem, the letter also pointed out that it is because the American securities law regulation, the Basis had a negative impact, suggesting that the regulatory body for the U.S. Securities and Exchange Commission (SEC).
The negative impact is mainly reflected in the: The bond and stock token token set Basis token system, legally in the United States is likely to constitute the “securities”.
6 months of this year, the U.S. Securities and Exchange Commission (SEC) will be defined as crypto currency securities. Although classified in a certain extent can reduce the legal risk of securities, reduce the threshold to enter the financial market, attract more investors; but at the same time, the securities will exist restrictions, there are limits on trading to specific investors.
According to the regulations, any issue of the United States token company must be registered to the U.S. SEC, if not registered, it shall meet the conditions of exemption. That is only to investors outside the U.S. sale, or sell only to accredited investors, individual investors need to meet the recognition in the past two years the middle income of more than $200 thousand or $1 million of the net assets of the minimum conditions.
In addition, if not in compliance with federal regulations may lead to punishment, may even make the project of derailment.
Conflict mechanism and investor restriction system
This is the Basis problem, SEC regulatory policy for trade and investment restrictions will greatly reduce the liquidity of the money market stability.
According to the Basis Basis white paper, designed a token mode, including the stability of currency Basis; stable price of Basis bonds token, receive Dividend Equity token. (details visible another version)
Regulation of Basis in maintaining a stable currency and dollar exchange 1:1, when the Basis price below $1, the system will issue bonds repurchase discount token Basis, trying to raise Basis price. The future of Basis back to $1 on the occasion, in exchange for a $1 bond token Basis.
But in order to ensure the interests of the participants early, Basis is the first payment to buy bonds in accordance with the queue instead of a proportional payment purchase mechanism.
The disadvantage is that it means the payment is limited, once the Basis rise, will lead to a large number of arbitrage high selling in the hands of Basis, causing Basis continue to fall. Thus this mechanism effectively establish a continuous injection of funds is still in the case of Basis.
Although trading restrictions usually in the securities issued in the 12 months after the failure, but because of the system need to follow the quantity theory of money issuance, so the limit will be endless.
The letter also mentioned that in order to save the decline, the basis team had considered many ways to comply with regulatory conditions, including the launch of the offshore bond has additional utility, initially to maintain the stable mechanism of centralized rather than to the center of the other, but still powerless.
SEC an iron fist
Sorry basis open letter of love is very obvious, as a world famous traditional venture capital investment institutions, crypto currency totaled 1.33 billion in financing the star project, less than a year’s time so ended a sigh at the same time it is not difficult to see that the United States in the fight against illegal SEC ICO on an iron fist.
According to the onion app finishing data show that since August this year, the United States SEC announced at least 12 ICO related punishment and event review. In the event of punishment, the penalty amount of American SEC implementation is between 30 thousand to 3 million U.S. dollars; the object of punishment coverage, including 3 encryption currency trading platform, 3 suspected fraud of ICO enterprises, 2 of the ICO project, 2 asset management company or the fund and for personal action, a block chain company.
Because of the high cost of litigation, the vast majority of treatments were returned to investors’ money and pay a fine. In November this year, according to the SEC for the other two made without security tokens registered punishment, in liquidation, liquidation amount of U.S. SEC regulations and the amount of interest the initial purchase of Token, and all the compensation will be calculated and paid in dollars, while the dollar exchange rate to buy tokens is subject to.
Due to the current encryption currency overall cliff fall, many have been summoned to the block chain project has been in trouble. The refund Basis not clear.
But in the near future, we may hear more American startups ICO message.
The following is the original announcement (slag double version)
Dear Basis community,
18 months ago, we made a grand goal, namely the establishment of a better monetary system: one can resist the vicious inflation, not more stable and sound centralized control, than the previous monetary system. This is the one we think if we realize it can create great value for society, but also a very good we think we can achieve the goal.
We start from a white paper, the white paper proposes a stable, to the center of the encryption currency, called Basis, which has the potential to achieve this vision.
Basis according to changes in demand by encouraging traders to maintain stable sales basis, basis. These incentives is through regular “bonds” and “stock” token chain auction (on-chain auctions) set up, to adjust the basic service supply. Because the ecosystem based needs some time to develop, for the first time we also need to play the role of traders, which means that the capital intensive enterprise. Therefore, after the release of our paper, we raise 1.33 billion dollars. We are attracted to all kinds of investors, and that they can add a lot of value for the project, and we will be able to build a large stabilization fund to guide system. Next, an excellent team building success, mainly focus on the start-up system.
Unfortunately, because the U.S. Securities Regulatory had to be used in this system, we start the Basis ability and thus have a negative effect.
With the passage of time, regulatory guidance has gradually surfaced, our lawyers reached a consensus, there is no way to avoid debt and equity securities status tokens (although Basis may not be affected by the character limit).
Because of its as unregistered securities, bonds and shares will be subject to restrictions on the transfer of tokens. In the first year after the release of Intangiable, lab (Basis company) will be responsible for token ownership restrictions in the United States recognized by the investors, and the qualification for international users.
Enforce transfer restrictions will require a white list set, which means that our system will not only lose its censorship resistance, and liquidity chain sale will significantly reduce.
The chain auction participants less, will have a negative impact on the stability of Basis, make Basis attractive to users essentially reduced. In addition, applying the transfer restrictions of the bond and stock token auction, actually harmed our ability to build Basis ecosystem.
Although the transfer restrictions usually in securities issued 12 months after the failure, but because of our monetary policy provisions of the bond and stock auction will continue to issue tokens, thus indefinitely require the transfer restrictions and concentrated white list.
We consider many alternative ways, to comply with regulatory restrictions, while maintaining our product attractiveness and competitiveness. These pathways include the introduction of additional utility with offshore, so that the financial nature of the bond and stock tokens is reduced, and start from the stable mechanism of concentration. However, after all, we believe that any path we consider are not enough to attract users or investors in us, or with our vision sufficiently consistent to justify the move.
Therefore, we regret to tell you that we have decided to return the funds to investors. Unfortunately, this also means that the Basis project will be closed.
Although this is not any of us want results, but we know in this stage, we are fundamentally two yuan bet in a favorable regulatory environment. We bet two yuan is the reason why we in the first return of capital contains tokens sales terms, although it is our hope that never have to rely on. So, although we are disappointed, we cannot start we hope to establish the system, but we appreciate in this case, the least we can do the right thing for our investors.
Finally, we sincerely thank all the support we and our projects, from the extraordinary trust of our supporters and partners, to those with our outstanding team together to complete the mission. You gave us the chance to change the world, we are looking forward to try again.
Until the next time.
Nader Al-Naji, Lawrence Diao, Josh Chen (three co-founder) and Basis team.
(I’m a reporter exchange of aloe, please add WeChat 1012387983, please note Name, unit, position and reason.)