Cryptolender Babel Finance Proposes New Stablecoin To Repay Creditors

Embattled Hong-Kong-based crypto lender Babel Finance is considering launching a decentralized stablecoin to repay its creditors, Bloomberg reported. The new stablecoin is proposed to be issued as part of the company’s restructuring plan led by co-founder Yang Zhou, now sole director of Babel.

Babel Finance’s restructuring plan

On Monday, Babel Finance filed a moratorium on protection at the Singapore High Court, urging creditors not to take any action against the company for up to six months while it seeks their approval of the restructuring plan.

Babel suspended customer withdrawals and redemptions in June 2022, citing “unusual liquidity pressure”. Cryptocurrency valuations plunged last year as investors dumped risky assets due to rising interest rates. Babel’s decision to freeze withdrawals followed the collapse of the Terra ecosystem and the Celsius network.

Yang Zhou now aims to build Hope – a decentralized finance (DeFi) platform that will include a stablecoin of the same name. The dollar-pegged Hope stablecoin will initially use Bitcoin (BTC-USD) and ether (ETH-USD) as collateral and then add more coins at later stages. The company’s restructuring plan aims to use the revenue generated by the DeFi project to repay creditors.

Babel revealed in its restructuring filing that co-founder Wang Li, who was removed from his leadership position in December 2022, was responsible for a $766 million loss to the company, stating that “the risky trading activities appear to have been directed solely by Wang. “

Babel estimates that Wang’s trading activities led to a loss of $524 million worth of Bitcoin, Ether and other tokens owned by the company and its customers. In addition, $224 million was lost when the company’s counterparties liquidated collateral after it failed to meet a large volume of margin calls.

Risks associated with the crypto market continue to be an issue. Most recently, Silvergate Capital (NYSE:SI) discontinued its crypto platform Silvergate Exchange Network, warning that it may not be able to survive as a going concern. While the news dragged down the shares of various crypto firms, the largest cryptocurrency by market capitalization, Bitcoin, traded in a narrow range on Monday. Bitcoin has risen over 35% since the start of 2023, compared to a decline of nearly 41% over the past year.

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