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Finblox and Babel Finance have become the latest victims of an industry-wide crypto liquidity crunch, with both announcing new restrictions on customer withdrawals.
On Friday (June 17), wholesale crypto-platform Babel Finance said that due to “unusual liquidity pressures” it would be temporarily suspending all withdrawals and redemptions.
“Recently, the crypto market has seen major fluctuations and some institutions in the industry have experienced conductive risk events,” the company said.
“We are in close communication with all related parties on the actions we are taking in order to best protect our customers. We apologise sincerely for any inconvenience caused.”
Based in Hong Kong, Babel Finance was valued at $2bn as recently as last month, when it completed an $80m Series B fundraising round.
Among its investors was Circle Ventures, the venture capital arm of Circle, the issuer of the USDC stablecoin.
Babel Finance is one of the largest service providers to institutions in the crypto-industry. It serves around 500 customers and limits its business to bitcoin, ethereum and a number of stablecoins.
At the end of 2021, it had an outstanding loan balance of more than $3bn, an average monthly trading volume of $800m in derivatives, and had structured and traded more than $20bn in options products.
"The crypto financial market is full of opportunities and hidden risks,” co-founder and CEO Del Wang said after the funding round.
“From the perspective of short-term profits, the retail market and altcoins may have higher profit margins, but we pay more attention to the long-term development of the industry and aim to lead in institutional financial services and innovation.
“This not only helps to overcome the many uncertainties in the early stage of the industry, including regulatory and market uncertainties, it also protects our customers to the greatest extent."
Finblox restricts withdrawals
The day before Babel Finance’s announcement, on June 16, another Hong Kong-based crypto platform also imposed restrictions on withdrawals and other features.
In a company statement, crypto-lender Finblox said that it had paused yield payments and raised withdrawal limits from $500 to $1,500 per day for all customers.
Finblox also paused referral and deposit rewards, and disabled the creation of crypto addresses for newly-registered users.
“This set of actions is a necessary move in such a highly volatile market and we believe should help us and our community to manage the effect,” the company said.
“Ultimately, Finblox will do everything in its power to protect our users’ funds and reinstate our services in full.”
Finblox said that it had imposed the restrictions due to question marks over the solvency of Three Arrows Capital (3AC), a crypto hedge fund estimated to be worth $18bn in November last year, before the crypto markets shed about 70 percent of their value.
3AC is both a shareholder and an institutional borrower that uses Finblox’s lending platform.
The Finblox intervention comes after reports by The Block and FT that 3AC suffered more than $400m in liquidations last week, including at least one forced sale to crypto lender BlockFi.
