The chipping could be due to moisture being 'forced' through the wall from the outside. Maybe the top-coat is old. I can't say for sure w/o seeing it myself. Anyways, if you don't have water problems in the basement, then I'll guess the problem is due to moisture coming from outside.
Do this test. Take a 2' x 2' piece of plastic and duct-tape it to the wall for 2-3 days. After 2-3 days, remove the plastic and see if you have 'light' condensation on the underside of the plastic. If you do, you should be ok to seal the wall. If there are droplettes or water 'runs' on the plastic, your new finishing job won't last. be sure you do this test where you have a decent amount of exposed foundation wall. (Peel some paint if you must.) Also, make sure you SEAL the entire perimeter of the plastic so none of the moisture excapes.
My best to ya and hope this helps.
Jay J -Moderator
PS: God BLess America!