Babylon and Aegis, prominent players from the staking and custody spaces, have teamed up to let BTC holders borrow capital against their holdings. The service, built atop the Aave protocol, will offer a fixed-rate structure for institutional borrowers and market makers to shield them from market volatility, much like the loans issued by traditional banks, including those on Wall Street.
The service was announced by Babylon on Thursday, further validating BTC’s value as a legitimate collateral asset capable of supporting institutional borrowing.
The offering is being advertised as a solution to the present issue with on-chain lending — variable interest rates that fluctuate with market conditions. The announcement said this service will make financing costs transparent for treasuries, funds, or market makers so they know how much exactly they would be committing for a defined period.
As part of the team effort, Babylon will provide the infrastructure for users to choose BTC as a colletaral option and Aegis will put fixed-rate credit products on the table. Aave, meanwhile, will facilitate the borrowing against that BTC collateral.
“The upcoming collaboration is designed to give Bitcoin holders access to stablecoin liquidity without wrapping assets, bridging to other networks, or relinquishing custody. The planned product will combine Babylon Trustless Bitcoin Vaults, Aave v4 and Aegis’ fixed-rate lending infrastructure,” said the announcement.
The service is expected to go live between October and December this year. As of now, the platforms have not revealed borrowing caps for BTC-backed loans under the service.
Crypto players powering up BTC-backed loans is picking pace because it brings more usability to idle laying assets following a shifting regulatory tide in the US and global markets.
Last year, for instance, Coinbase debuted its own crypto-backed loans service on the Base blockchain in partnership with infra provider Morpho.
