Basis, a once-highflying cryptocurrency project, is shuttering.
Formerly known as Basecoin, Basis raised $133 million in venture capital earlier this year to develop a so-called stablecoin, a cryptocurrency whose price remains fixed, despite market volatility. The company said in a post on its website Thursday that it would return the remainder of its funds to investors, including Andreessen Horowitz, Lightspeed Venture Partners, and GV, the venture capital arm of Alphabet, Google’s parent company.
Salil Deshpande, an investor at Bain Capital Ventures who led the investment round in Basis, discussed Basis’ closure on the latest episode of Balancing The Ledger, Fortune’s show on the intersection of tech and finance. Deshpande said Basis tried to make changes to its intended product that would make it comply with U.S. securities law—the cause of its undoing—but the company ultimately found this wasn’t worth the effort.
“The team explored a whole bunch of alternatives for what to do about this,” Deshpande said. In the end, Basis’ leadership chose to abandon the idea rather than compromise its original vision.
“To make an analogy, if you’re playing tennis and you decide, instead of tennis rackets, you want to start using tiny, little paddles, and instead of a tennis ball you want to start using a small plastic ball, and then you want to play on a table instead of a tennis court, at some point along that way it stops being tennis and starts becoming ping pong,” Deshpande told Fortune’s Robert Hackett and Jeff John Roberts.
In Deshpande’s analogy, each change to Basis’ system made it look more and more like other stablecoins already on the market, such as Tether, Maker Dao’s Dai, the Winklevoss twins’ Gemini Dollar, and Circle’s USD Coin. “It didn’t seem like a big contribution to the world if we did that,” Deshpande said.
Basis differed from other stablecoin projects by employing a so-called algorithmic central bank. This blockchain-based computer program was intended to issue bond tokens and share tokens in support of a dollar-pegged stablecoin.
Most stablecoin projects, on the other hand, collateralize their dollar-pegged assets with either fiat currency, like U.S. dollars, or cryptocurrencies, like Bitcoin and Ethereum.
“There was some hope and some assumption that the regulatory environment would be a little more favorable to the bond tokens and share tokens than it actually was,” Deshpande said.
Some cryptocurrency experts were skeptical of the project from the start, saying that the fundamental economics were bound to result in a death spiral. But Deshpande stood by the founders’ concept, even amid its last gasps.
“You could argue that if something is complicated enough and ambitious enough, then it’s silly,” Deshpande said. “A lot of venture investments are silly or seem silly.”
“All of the investments I’ve made that have worked have had those characteristics,” said Deshpande, whose biggest investment successes include the software company Mulesoft and and peer-to-peer loan issuer LendingClub.
The Block, a cryptocurrency news outlet, first reported the news of Basis’ planned closure on Wednesday.
