By James Davis
According to a Bloomberg report, China-based crypto lending company Babel Finance is looking to roll out a decentralized stablecoin that the firm will use to repay creditors.
Babel Finance co-founder Yang Zhou is spearheading the company’s restructuring efforts which revolve around a DeFi project named Babel Recovery Coins. Zhou pitches the project as a dual-token ecosystem featuring a token called Light and a stablecoin dubbed HOPE.
The plan explained in the filing reveals that Babel Finance will use the revenue generated from the proposed project to repay its creditors. In addition, HOPE stablecoin will be backed by BTC and ETH in its early stages, with more tokens to be added later.
Babel Finance Faces Liquidity Problems
Last May, the crypto lender raised over $75 million but halted redemptions and withdrawals the following month, citing ‘unexpected liquidity pressures’ due to its exposure to fallen crypto firms like Celsius, Three Arrows Capital, and Terraform Labs.
It was discovered that Babel Finance lost over 7800 BTC and $55,000 in ETH, cumulatively worth $220 million at the time. The company also lost an additional $300 million in various cryptocurrencies due to irresponsible trading activities instructed by Wang Li, Babel Finance co-founder.
The crypto lender now plans to file a moratorium of protection to Singapore’s high court to bar its creditors from taking any legal action against the firm for at least six months.
Babel Finance Joins List of Debt Token Issuers
Restructuring efforts via the issuance of tokens is not a new concept in the crypto space. In 2019, Bitcoin exchange Bitfinex rolled out the LEO Token to recoup more than $800 million in losses suffered from its partnership with Crypto Capital.
In January 2023, the bankrupt crypto lender Celsius proposed a new restructuring plan involving a new token issuance that would help the company raise money to repay its creditors.
At the time, Celsius’ attorneys argued that issuing a token would enable the firm to raise more funds for its creditors rather than simply selling off its limited assets at current prices.
Even former FTX CEO Sam Bankman-Fried suggested a restructuring plan revolving around a new FTT token last December. However, the exchange’s new leadership appears not to be considering that option.