Babylon Labs has raised $15 million in funding from crypto a16z to support the development and scaling of Babylon Trustless BTCVaults, an infrastructure system designed to enable native Bitcoin to be used as collateral in on-chain financial applications, the company said in a blog post on Wednesday.
The platform’s BABY token increased by 13% after the a16z investment.
The investment will be used to advance the core technology behind BTCVaults and support integration with external applications that require verifiable, non-custodial Bitcoin collateral, the company said.
a16z crypto will also provide strategic input based on its experience investing in blockchain infrastructure.
BTCVaults are designed to allow Bitcoin to be locked to the Bitcoin base layer while remaining verifiable by external systems. The system is intended to allow applications to confirm that BTC collateral remains in place and enforce conditions such as unlocking or liquidation via cryptographic mechanisms, rather than custodial control or wrapped representations of the cryptocurrency.
Most existing on-chain Bitcoin collateral solutions rely on custodians or wrapped BTC, requiring users to relinquish control of their assets or convert the cryptocurrency to a different representation.
Babylon’s approach is designed to allow BTC to remain native to the Bitcoin network while continuing to be used in financial applications.
The development of BTCVaults comes against a backdrop of growing institutional use of bitcoin as collateral. Regulators, banks, asset managers and trading firms are increasingly recognizing BTC in lending, derivatives and investment products, while the majority of crypto supply remains unused in on-chain financial systems.
BTCVaults are designed to support a range of financial use cases, including borrowing, lending and other collateralized products, without requiring custodians or asset pooling, Babylon said. The infrastructure is intended to be compatible with decentralized and traditional financial systems.
The funding will support Babylon’s goal of enabling BTC to function as productive collateral while preserving self-custody and operation on the Bitcoin base layer.
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