Beleaguered Crypto Lender Babel Finance Eyes Restructuring With Stable Asset Project – How Does It Work?
Troubled crypto lending firm Babel Finance is working on a new plan to raise money through a crypto-backed stablecoin.
The new stablecoin being proposed is called Babel Recovery Coin. The plan is for the coin to maintain a $1 price in the market through a system of trading incentives, and the support of bitcoin (BTC) and ethereum (ETH).
The new coin has been proposed by Babel Finance co-founder Yang Zhou, who is now the sole director of the Singapore-based company, as a way to repay creditors while giving the company a chance to continue operations.
News of the recovery plan was first reported by Bloomberg, and later discussed by the crypto community on Twitter, where one user derided the proposal as an attempt to “make everything back into a trade:”
Moratorium on protection filed
According to the Bloomberg report, Yang has now filed a moratorium on protection at the Singapore High Court, asking the court to prevent creditors from taking action against the company for six months while the recovery plan is negotiated.
In the filing, Yang is also said to blame Babel’s problems on co-founder Wang Li, who left the company last December. It is estimated that $525 million of BTC, ETH and other cryptocurrencies were lost as a result of trading activities under Wang’s leadership.
“[…] the risky trading activities appear to have been directed solely by Wang, the Bloomberg filing said.
Neither Wang Li nor Yang Zhou have so far publicly commented on the report.
Similarities to other stablecoins
Backed by BTC and ETH, Babel Recovery Coin shares some common features with decentralized stablecoins such as MakerDAO’s DAI, which is backed by a basket of other cryptocurrencies and stablecoins. It also brings to mind the failed algorithmic stablecoin TerraUSD (UST), which disgraced Terra founder Do Kwon backed with BTC before it collapsed.
Babel Finance started in China with the backing of a number of prominent China-focused investors, including Sequoia Capital China, Tiger Global and Dragonfly Capital. The company later opened a store in Singapore, where it now has its head office.
Babel is one of many crypto lending firms that have faced problems during the recent downturn in the crypto market. Other firms in the same category include bankrupt US-based crypto lenders Celsius, BlockFi and Voyager Digital, as well as bankrupt crypto hedge fund Three Arrows Capital (3AC).
