Babel Finance Halts Withdrawals as Crypto Market Plunges
Babel Finance, a cryptocurrency lending firm based in Hong Kong, on Friday, announced that it has temporarily paused the withdrawals and redemption of crypto assets. The move comes as the crypto lender appears struggling to pay its customers after the recent plunge in the cryptocurrency market.
“Recently, the crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events. Due to the current situation, Babel Finance is facing unusual liquidity pressures,” the firm stated.
The company further elaborated: “Babel Finance is taking action to best protect the interests of our clients. We are in close communication with all related parties and will share updates in a timely manner."
Babel has 500 customers and limits itself to Bitcoin, Ethereum, and stablecoins for its business operations. Last month, the crypto lender raised $80 million in a funding round that gave the firm a valuation of $2 billion. The firm ended last year with $3 billion of loan balances on its balance sheet.
Market Contagion Fears Spread
On Thursday, rival crypto staking and yield generation platform Finblox, based in Hong Kong, made a similar move, imposing a monthly withdrawal limit of $1,500 and suspended rewards in connection with uncertainty surrounding crypto hedge fund Three Arrows Capital and market volatility.
In a statement, Finblox said that it made the decision as it evaluates the impact of Three Arrow Capital's recent issues. Last December, Three Arrow Capital made an investment of $3.6 million in the Hong Kong-based platform. Early this week, Three Arrows Capital, one of the largest crypto hedge funds in the world, raised fears of facing potential insolvency risks after several leading exchanges liquidated the fund's positions.
On Monday, crypto prices fell hard triggered by major U.S. cryptocurrency lending company Celsius Network pausing withdrawals and transfers, as it cited "extreme" market conditions.
The crypto market is at its lowest point since December 2020, with Bitcoin trading narrowly above $20,000 while Ether holds onto the psychological level of support at $1,000. In the past few weeks, crypto markets crashed as rising interest rates and increasing inflation prompted investors to ditch riskier assets across financial markets.
The recent move by the Federal Reserve to increase interest rates by 0.75 percentage points, has led to a number of bubbles including tech stocks and crypto tokens. Crypto investors have also been adversely impacted by the collapse of the TerraUSD and Luna tokens in May.
Image source: Shutterstock
Crypto.Com, BlockFi Announce Massive Layoffs as Economic Crisis Bites