SHANGHAI- Hong Kong-based crypto lender and asset manager Babel Finance said on Monday it has secured funding from investors including Zoo Capital, Sequoia Capital China and Dragonfly Capital.

The $40 million fundraising, which also includes BAI Capital and Tiger Global Management, shows growing investor interest in Asia's cryptocurrency players, Babel Finance said.

Babel CEO Flex Yang told Reuters that the round of strategic Series A fundraising, while not adding much to free cash flow, marked an alliance with traditional finance players.

It also marks debuts in Asia's crypto finance industry for U.S. investment firm Tiger Global Management, European investor BAI Capital and Zoo Capital, the venture arm of China-focused private equity firm Boyu Capital.

Bitcoin mania has spread to Asia, and last month the asset management unit of Huobi Technology Holdings Ltd launched four crypto-related funds for institutional investors.

Bowen Wang, head of crypto at Zoo Capital, said in a statement it invested in Babel Finance to help build a gateway for the traditional market to access cryptocurrencies.

Yang, who is from China, said Babel will apply for business licenses in America, Europe and Asia, with a goal of meeting growing demand for crypto investment from mainstream investors.

Compared with the United States, Asia's crypto sector faces a less friendly regulatory environment, Yang added.

Although regulators in China have banned crypto exchanges as well as initial coin offerings (ICOs), Yang said he was encouraged by deputy central bank governor Li Bo saying last month they were studying crypto as an investment tool.

"Regulatory uncertainty has been a source of risk for us. If the government moves toward more clarity, it's a good thing for us," Yang said.

(Reporting by Samuel Shen and Andrew Galbraith; Editing by Alexander Smith) ((samuel.shen@thomsonreuters.com; +86 21 20830018; Reuters Messaging: samuel.shen.thomsonreuters.com@reuters.net))