Chinese cryptocurrency financial services firm Babel Finance rides the mainstream wave with US$40mil Series A
Officially banned in China in 2017, bitcoin and other
cryptocurrencies are now making their way to mainstream acceptance with the
help of Chinese-run start-up Babel Finance.
“Education [of investors on bitcoin] isn’t necessary any
more,” said Flex Yang, founder and CEO of the Hong Kong-based cryptocurrency
financial services firm, in an interview with the South China Morning Post.
“The crypto market has evolved from geek-only to institutional and
professional.”
The value of bitcoin, the largest cryptocurrency by volume,
has doubled since the start of the year after big Wall Street firms dabbled in
the exchange. BlackRock added bitcoin futures as a potential investment for two
of its funds, and Goldman Sachs relaunched its cryptocurrency trading desk in
the spring, according to CNBC and the Financial Times.
Tesla founder Elon Musk said in March that people can buy
its electric cars with bitcoin. Musk’s posts have been credited with pushing up
the value of cryptocurrencies, including bitcoin and dogecoin.
“Our business was small before,” said Babel‘s Yang. ”But
over the past three years, especially since late 2020, the crypto market has
skyrocketed and received many more institutional investors.”
On Monday, Babel Finance announced the completion of its
strategic Series A fundraising of US$40mil (RM164.86mil) from some traditional
financiers including Sequoia Capital China, Tiger Global Management,
Bertelsmann and BAI Capital. Other investors included Zoo Capital and Dragonfly
Capital.
“The alliance [will allow us to] provide a full suite of
reliable services to meet the growing demand from mainstream investors who are
keen to add crypto assets in their portfolio,” Yang said.
Yang said that when he formed the firm in 2018, he and his
colleagues had to spend hours explaining to potential investors what bitcoin
was.
Yulong Liu, Babel’s partner and head of global partnerships,
witnessed that change via recruitment.
“Before it was very hard to poach talents from traditional
financial institutions,” Liu said. “Now we receive resumes from Goldman Sachs
[employees].”
Babel runs three major businesses: crypto loans, crypto
assets management and institutional services that help financial companies
access major crypto exchanges with the help of its risk control technology.
The amount of its outstanding loans rose to the equivalent
of US$2bil (RM8.24bil) by the end of February, with a monthly trading volume of
US$8bil (RM32.97bil), as it tries to go mainstream by applying for asset
management licences in Hong Kong and Singapore. It is also considering a
banking licence in Europe.
Babel’s major rival Matrixport, established in 2019 by
former Bitmain co-founders Jihan Wu and Yuesheng Ge, said on its official website
that its outstanding loans were equivalent to US$400mil (RM1.64bil) and that it
had a monthly trading volume of US$5bil (RM20.61bil).
“We’re frenemy with our industry peers,” said Yang, “We lend
and borrow from our rivals as well.”
Beijing imposed a ban on initial coin offerings and
cryptocurrency exchanges in 2017. Local governments’ stance on crypto mining,
although not completely banned, has been more prudent over power consumption
concerns.
But Li Bo, deputy governor of the People’s Bank of China,
recently set a softer tone for the digital assets, saying that he viewed
cryptocurrencies as an “investment alternative”.
“[Cryptocurrency assets] are not currency per se,” said Li
in April at the Boao Forum in Hainan province. “And so the main role we see for
crypto assets going forward, the main role is investment alternative.”
Babel’s Yang said that Li’s comment may signal a positive
shift that the industry could benefit from future policies.
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