Babylon Secures $15M from a16z to Build Bitcoin-Native Lending

Babylon, a decentralized protocol targeted on enabling native Bitcoin staking and lending, acquired $15 million in funding from a16z Crypto by way of the sale of Babylon’s native BABY (BABY) tokens to the digital asset arm of Andreessen Horowitz.

In a weblog post revealed Wednesday, a16z Crypto stated the funding will assist continued growth of the protocol’s Bitcoin-native infrastructure.

“Bitcoin’s restricted programmability” has left massive quantities of Bitcoin (BTC) sitting idle, the weblog reads, arguing that enabling its use as collateral might unlock a serious supply of onchain capital and permit BTC to perform as a productive asset inside decentralized finance (DeFi).

Based as a Bitcoin staking protocol in 2022 by David Tse and Fisher Yu, Babylon Labs is growing a Bitcoin-native system of trustless vaults that enables BTC to be used as collateral in onchain lending whereas remaining on the Bitcoin community and below the person’s management.

In December, Babylon partnered with Aave Labs to convey native Bitcoin-backed lending to Aave V4, Aave’s newest lending structure, with Babylon aiming to construct a devoted “Bitcoin-backed Spoke” that enables BTC to be used as collateral with out wrappers or custodians.

The mixing is predicted to enter testing within the first quarter of 2026, with a joint product launch focused for April 2026.

BABY rose sharply on Wednesday and was up about 5% at time of writing, in accordance to CoinGecko knowledge.

Associated: Blockrise wins Dutch MiCA license, brings Bitcoin-backed loans to EU businesses

Bitcoin lending evolves in 2025

Crypto-backed lending was broadly blamed for magnifying the fallout of the 2022 FTX collapse, as opaque steadiness sheets, rehypothecation and excessive leverage unraveled alongside falling token costs.

In 2025, the sector resurfaced in a extra restrained kind, with lenders emphasizing full collateralization, stricter custody practices and tighter danger controls.

In January, Coinbase reintroduced Bitcoin-backed loans in the United States, permitting eligible customers outdoors New York to borrow up to $100,000 in USDC (USDC) in opposition to BTC held on the platform. The loans are facilitated by Morpho Labs and executed on Base, Coinbase’s Ethereum layer-2 community.

In March, Xapo Financial institution launched Bitcoin-backed US dollar loans, enabling eligible shoppers to borrow up to $1 million in opposition to BTC holdings. The financial institution positioned the product for long-term Bitcoin holders in search of liquidity with out promoting, stressing that collateral is held in institutional MPC custody and never rehypothecated.

In the meantime, digital asset lender Ledn moved to a completely collateralized, Bitcoin-only lending mannequin in Might. Beneath its revised construction, the corporate stated shopper Bitcoin used as collateral will stay in custody and won’t be loaned out or reused to generate yield.

Ledn co-founder Mauricio Di Bartolomeo advised Cointelegraph in June that Bitcoin holders are additionally more and more utilizing BTC-backed loans to finance real estate purchases, permitting them to entry liquidity whereas sometimes avoiding capital positive aspects taxes.

Journal: How crypto laws changed in 2025 — and how they’ll change in 2026