TLDR
- Babylon received $15 million in funding from a16z Crypto through a BABY token sale.
- The funding will support Babylon’s expansion of its Bitcoin-native staking and lending infrastructure.
- Babylon was founded in 2022 by David Tse and Fisher Yu to make Bitcoin a productive onchain asset.
- The protocol enables users to lend and stake Bitcoin while maintaining full custody on the Bitcoin network.
- Babylon partnered with Aave Labs to launch native Bitcoin-backed lending on Aave V4 by April 2026.
Babylon raised $15 million in funding from a16z Crypto as the firm looks to expand its Bitcoin-native lending protocol, and the investment came through the purchase of Babylon’s BABY token by the digital asset division of Andreessen Horowitz.
BABY Token Sale Fuels Development of Bitcoin Infrastructure
Babylon secured the investment by selling its native token, BABY, to a16z Crypto, which backed the project’s roadmap for Bitcoin-native infrastructure. The funds will support Babylon’s development of trustless vaults that let users stake and lend Bitcoin without using custodians or wrapped tokens.
Founded in 2022 by David Tse and Fisher Yu, Babylon aims to make Bitcoin a productive onchain asset by enabling lending and staking. The protocol keeps BTC on the Bitcoin network and under the user’s control. The team designed it to function without moving assets to other chains.
a16z Crypto said, “Bitcoin’s limited programmability has left most of it idle,” adding that Babylon could unlock new capital flows. The protocol’s ability to keep BTC native while allowing staking caught attention in the decentralized finance space. With BABY tokens now trading around $0.02, the asset saw a 5% increase after the announcement.
Babylon and Aave Labs Target Native BTC Lending
Babylon formed a partnership with Aave Labs in December to bring native Bitcoin-backed lending to Aave’s upcoming V4 protocol. The collaboration aims to develop a dedicated “Bitcoin-backed Spoke” to allow BTC to be used as collateral without wrappers.
The integration is set for testing in the first quarter of 2026 and targets a joint launch by April 2026. Both companies are working to maintain full Bitcoin custody during collateral usage to avoid third-party risk. This setup ensures BTC never leaves the Bitcoin network throughout the lending process.
Babylon’s infrastructure focuses on decentralization and self-custody, which aligns with evolving DeFi practices. The company’s vault system supports the shift to safer lending models in the ecosystem. Aave’s architecture will provide the lending interface while Babylon secures the Bitcoin collateral natively.
Industry Moves Toward Fully Collateralized BTC Lending
In 2025, several institutions reintroduced Bitcoin-backed loans with stricter safeguards, following the 2022 fallout. Coinbase launched Bitcoin-backed loans for eligible users in January, with support from Morpho Labs on Base.
Xapo Bank began offering US dollar loans backed by BTC in March, with borrowing limits up to $1 million. The bank stressed that client collateral would remain untouched, held in institutional MPC custody. They said the funds were not subject to rehypothecation.
Ledn adopted a fully collateralized Bitcoin-only model in May, restricting reuse of client collateral. Co-founder Mauricio Di Bartolomeo said many clients used BTC-backed loans to finance real estate purchases. He noted that some did so to avoid triggering capital gains taxes on their holdings.
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