The volatility in the digital assets market has spread to Asia following the announcement from Hong Kong-based crypto lender Babel Finance that it has suspended withdrawals and redemptions.
According to its statement on 17 June, the move is a result of “major fluctuations” in the market and “conductive risk events” among institutional participants which have created “unusual liquidity pressures” for Babel Finance.
This follows similar steps taken by other crypto exchanges and lending platforms in recent weeks. Binance, the world’s largest crypto exchange by volume, halted withdrawals of Bitcoin earlier this month while another crypto lending platform Celsius suspended all redemptions.
Crypto lending platforms work in the same way as securities lending services by taking investors deposits and lending them to borrowers at a premium to generate returns.
However, the volatility in the crypto market and plunging valuations has created a liquidity issue for some providers.
As of the end of 2021, Babel Finance had an outstanding loan balance in excess of US$3 billion, up from $2 billion in February 2021.
In an update published on its website on 20 June, Babel Finance announced that it had reached an agreement with counterparties on the repayment of debt to ease its short-term liquidity issues.
“Babel Finance will actively fulfil its lending responsibilities to customers and strive to avoid further transmission and diffusion of liquidity risks,” it stated.
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