Embattled Hong-Kong based crypto lender Babel Finance is mulling the launch of 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.
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Babel Finance’s Restructuring Plan
On Monday, Babel Finance filed a moratorium of protection to the high court of Singapore, urging creditors not to take any action against the company for up to six months as it seeks their approval on its 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 Celsius Network.
Yang Zhou now aims to build Hope – a decentralized finance (DeFi) platform that will include a namesake stablecoin. 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 disclosed in its restructuring filing that co-founder Wang Li, who was ousted from his leadership position in December 2022, was responsible for a $766 million loss incurred by the company, stating “the risky trading activities appear to have been instructed 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. Additionally, $224 million was lost when the company’s counterparties liquidated collateral after it failed to meet a large volume of margin calls.
Risks related to the crypto market continue to be a matter of concern. 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 stocks of various crypto firms, the largest cryptocurrency by market value, 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.
