Babel Finance, a Hong Kong-based crypto lender that froze withdrawals in June 2020 due to market downturn and liquidity pressures, is reportedly planning to issue a crypto-backed stablecoin in partnership with a decentralized finance platform called Hope, in an effort to repay creditors following a $766 million loss. Co-founder Wang Li is said to have racked up $524 million in proprietary trading losses, while another $224 million was lost after lenders liquidated collateral supporting Babel loans. Hope stablecoin is proposed to be backed by bitcoin and ether, and will maintain a one-dollar peg with the ability for traders to benefit from arbitrage opportunities.
This approach is similar to that of Terra USD (UST), which was backed by crypto and led to the market collapse in 2020.