• Babel Finance, a crypto lending platform located in Hong Kong, is proposing the use of a decentralized stablecoin dubbed HOPE to repay its debtors.
• The initiative would produce revenue to repay creditors and the HOPE stablecoin would be backed by Bitcoin (BTC) and Ethereum (ETH).
• Babel Finance has allegedly lost 8,000 Bitcoin and 56,000 Ether valued at around $225 million due to high-risk trading strategies used by its co-founder Wang Li.
Babel Finance Proposes Stablecoin To Repay Debtors
Babel Finance, a crypto lending platform located in Hong Kong, is proposing the use of a decentralized stablecoin dubbed HOPE as part of a restructuring plan to repay debtors. According to Bloomberg’s report, the initiative would generate revenue that will be used to pay off creditors. The HOPE stablecoin will initially be backed by Bitcoin (BTC) and Ethereum (ETH), with other currencies added at a later date.
Background Of Babel’s Losses
Babel Finance received $80 million at a $2 billion value in May 2022 but froze redemptions and withdrawals the following month due to liquidity issues. Allegedly 8,000 Bitcoin and 56,000 Ether were lost by Babel exchange worth around $225 million caused by Wang Li’s high-risk trading strategies. Wang Li was removed from his position as head of the company in December last year. In order for them to have more time for restructuring efforts, they asked their creditors for an moratorium of protection with Singapore High Court which would refrain from pursuing any further action against them for up to six months.
Current Situation After Restructuring Plan
The current situation after restructuring plan is that Yang Zho is now the company’s sole director who is leading the DeFi initiative named “Babel Recovery Coins” which consists of two tokens – HOPE stable coin & Light Token which are proposed as part of dual-token ecosystem.
Benefits Of Using Stablecoins
Stablecoins are beneficial because they are less volatile than traditional cryptocurrencies due to their ability to maintain price stability through algorithmic mechanisms or asset backing from real world assets such as commodities or fiat currency reserves like U.S dollars or euros . This makes it easier for users who wish to transact without fear from large changes in market prices over short periods of time when making transactions on blockchain networks like Ethereum or Tron . Moreover , since these coins are pegged against other assets , it can also help traders hedge against potential losses incurred during market volatility .
Although Babel Finance has been caught up in collapses of Terra Ecosystem , Celsius Network & Three Arrows Capital , they believe that using decentralized finance & stablecoins could help them recover their losses & regain trust among clients . It remains uncertain how successful this venture will be given that there are still many challenges ahead but if implemented successfully then it could set precedent for similar projects looking into utilizing DeFi protocols & digital currencies .