Babylon Labs secures $15 million in funding from a16z crypto to build infrastructure for Bitcoin-backed collateral

Babylon Labs Secures $15 Million from a16z Crypto to Advance BTCVaults

Babylon Labs has announced a $15 million investment from a16z crypto, aimed at accelerating the growth and deployment of its Babylon Trustless BTCVaults. This innovative infrastructure is crafted to enable native bitcoin to serve as collateral within a variety of on-chain financial platforms, according to a company blog post released on Wednesday.

Following the news of the funding, Babylon’s BABY token experienced a 13% surge in value.

The newly acquired capital will be directed toward enhancing the foundational technology behind BTCVaults and facilitating seamless integration with third-party applications that demand secure, verifiable, and non-custodial bitcoin collateral.

In addition to financial backing, a16z crypto will offer strategic guidance, leveraging its extensive experience in blockchain infrastructure investments.

How BTCVaults Work

BTCVaults are engineered to lock bitcoin directly on the Bitcoin base layer, while still allowing external systems to verify the collateral. This setup enables applications to confirm the presence of BTC collateral and enforce actions such as unlocking or liquidation through cryptographic proofs, eliminating the need for custodial oversight or tokenized versions of bitcoin.

Traditional on-chain bitcoin collateral solutions typically depend on custodians or wrapped BTC, which often require users to surrender control of their assets or convert them into alternative formats.

Babylon’s solution is designed to keep BTC native to the Bitcoin network, while making it accessible for use in a wide range of financial applications.

Institutional Adoption and Use Cases

The introduction of BTCVaults comes as institutional players—including regulators, banks, asset managers, and trading firms—are increasingly utilizing bitcoin as collateral in lending, derivatives, and investment products. Despite this trend, most bitcoin remains idle within on-chain financial ecosystems.

Babylon’s BTCVaults aim to support diverse financial activities such as borrowing, lending, and other collateralized products, all without relying on custodians or asset wrapping. The infrastructure is built to be compatible with both decentralized and traditional finance systems.

This funding round will help Babylon Labs realize its vision of making BTC a productive form of collateral, while maintaining user self-custody and ensuring operations remain on the Bitcoin base layer.