The ripple effects of Celsius, Babel Finance, and 3AC’s liquidity crisis continue to shake up DeFi. Maple Finance announces they are halting withdrawals, while TrueFi, in a show of strength and stability during market turmoil, recovered an outstanding loan from 3AC.
Maple Finance is the latest of many crypto platforms to warn lenders that they are facing difficulties with liquidity.
“There may be instances where there is insufficient cash in pools,” the company writes in an official note published on Tuesday, also stating on Twitter that “lenders may be unable to withdraw and must wait for borrowers’ repayments and new deposits.”
It was not immediately clear what brought on the crisis, but a later update hints at the most likely source of the liquidity problems. Orthogonal granted a $10 million loan to Babel Finance from its USDC pool on Maple, the statement adds “Celsius and 3AC do not borrow from Maple.”
As the broader DeFi ecosystem continues to face the fallout from Celsius, 3AC, and Babel Finance unraveling, other uncollateralized lending platforms are faring a lot better.
TrueFi, the original and leading on-chain credit platform, confirmed its strong standing in an official statement: TrueFi’s credit committee has been rigorous in keeping the protocol’s lending book healthy and maintains active conversations with borrowers regardless of market conditions.
The latest TPS/3AC loan was successfully repaid ahead of maturity on June 20, 2022, with no impact for lenders. Celsius and Babel are not active TrueFi borrowers, having repaid their last TrueFi loans in January of 2022 and December of 2021, respectively.
Today, TrueFi lenders have no direct exposure to any of these three institutions.
Launched in November 2020, TrueFi pioneered blockchain-based uncollateralized lending and credit. Backed by a16z, Alameda research, and Blocktower, TrueFi unbundles banks’ hold on uncollateralized lending products, making DeFi truly institutional grade. The protocol already reached $1.6B in loans originated, and $1.2B in loans repaid still with no defaults.
The uncollateralized lending space has received greater attention as a promising section of DeFi. While most other lending protocols rely on over-collateralization, this has proved increasingly problematic, as Bitcoin and Ether, commonly used collateral, have dropped more than 70% in value since their all-time highs.
In an interview TrustToken, the core team behind TrueFi spoke proudly of their transparent policy for managing risk. Michael Gasiorek, the company’s CMO laid out essential aspects that are key to maintaining a strong system for credit and underwriting:
- A rigorous onboarding process that assesses a borrower’s creditworthiness
- A method for regularly updating creditworthiness based on changes to the borrower’s business/exposure, and the state of the market, and reflecting these changes in the borrower’s access to capital.
- Consistent, open communication between underwriter and borrower – in all market conditions
- A reliable way of pursuing collections against defaults, inclusive of an enforceable lending agreement
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice