Babylon Labs, a blockchain infrastructure project focused on expanding Bitcoin’s role in decentralised finance (DeFi), has raised US$15 million in funding from a16z Crypto, the crypto-focused investment arm of Andreessen Horowitz, to accelerate its development of native Bitcoin collateral systems.
The investment, disclosed in a December 7 announcement, will be used to build and scale what Babylon calls Trustless BTCVaults, a suite of protocols designed to allow native Bitcoin (BTC) to function as on-chain collateral without relying on wrapped tokens, custodians or intermediaries. This represents a major step toward enabling Bitcoin holders to use their assets as productive capital in lending, borrowing, stablecoins and other DeFi services while Bitcoin remains on its base layer.
Most existing Bitcoin-collateralised activity today takes place through wrapped versions of BTC on other blockchains or via centralised lending platforms, which introduces counterparty and custodian risk. Babylon’s vaults leverage advanced cryptographic tools such as witness encryption and garbled circuits to anchor collateral verification directly to Bitcoin’s blockchain, allowing third-party applications to confirm the status of collateral without moving BTC off its native network.
The project was co-founded by Stanford professor David Tse and blockchain developer Fisher Yu, and initially focused on Bitcoin staking, letting BTC holders earn yield without leaving the Bitcoin network. The new funding from a16z Crypto underscores growing institutional interest in infrastructure that pushes Bitcoin beyond a passive store of value and toward becoming productive capital in decentralised financial systems.
Babylon’s move has already drawn attention in the DeFi world as more than $1.4 trillion worth of Bitcoin remains largely idle, with less than 1% represented as wrapped assets for use in financial markets. By enabling BTC to serve as verifiable collateral on-chain, Babylon hopes to unlock new markets for lending and credit anchored to Bitcoin’s security and decentralisation.
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The a16z Crypto investment also includes strategic support and reflects confidence in the long-term vision of expanding Bitcoin’s utility. Babylon and partners such as Aave Labs have already announced plans to integrate native BTC collateral into Aave V4, with expectations that Bitcoin could be used for on-chain lending without relying on custodial solutions as early as April 2026.
The BABY token, native to the Babylon ecosystem, has reacted positively to the news, seeing modest price appreciation following the funding announcement, signalling trader optimism about Bitcoin’s expanded role in DeFi.
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