Leading cryptocurrency service provider, Babel Finance has put a temporary suspension on withdrawals and the redemption of crypto assets. The Hong Kong-based crypto lender has been scrambling to pay clients during the current digital market slump.
As cryptocurrencies have continued to dip, more investors have been trying to pull money out of cryptos and liquidate their positions.
Cryptocurrency valuations have plunged in recent weeks as investors dump risky assets in a rising rate environment, with bitcoin, which reached a record high of $69,000 in November, having lost more than half its value this year.
“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,” Babel has said in a company statement.
As crypto lenders, the Babel business model involves accepting retail crypto deposits and reinvest them, boasting double-digit returns and attracting tens of billions of dollars in assets. However, due to the recent financial crisis, lenders are unable to redeem their clients’ assets.
Babel, which only accepts Bitcoin, Ethereum and stablecoins from 500 clients, raised $80 million in a funding round last month, bringing the company value to around $2 billion. The company had $3 billion in loan balances on its balance sheet at the end of last year.
This week has already seen U.S.-based retail crypto lending platform, Celsius Network freezing withdrawals and transfers between accounts “to stabilize liquidity” after the collapse of cryptocurrency TerraUSD in May triggered a surge in redemptions.