Crypto exchange Bybit has partnered with lending protocol Avalon to offer Bitcoin yield to its users.
According to an April 14 X Avalon Labs announcement, the centralized decentralized finance (CeDeFi) protocol will now be a part of the exchange’s yield product, Bybit Earn. Avalon explains that it will allow the platform’s users to earn yield off of Bitcoin (BTC) by arbitrating on its fixed-rate institutional borrowing layer.
Source: Avalon Labs
Avalon Labs announced in March that it raised a minimum of $2 billion worth of credit with possible scaling as the need arises. The product in question allows institutional borrowers to access USDt (USDT) liquidity without liquidating their Bitcoin holdings at a fixed 8% borrowing cost.
In February, Avalon Labs also announced that it is considering issuing a Bitcoin-backed debt-focused public fund. Venus Li, co-founder of Avalon Labs, said at the time that the fund could be issued by leveraging a Regulation A US securities exception:
“We have spent years researching how Regulation A has been applied in traditional finance and whether it could be a viable path for crypto companies. While successful precedents in the crypto industry are limited, our analysis of previous SEC-approved cases suggests a viable path forward.”
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Centralized and decentralized finance unite
Avalon Labs’ product is a CeDeFi protocol, somewhere between decentralized finance (DeFi) and centralized finance (CeFi). This category of products — with their increased control over capital flows and access — often has some advantages in meeting the regulatory requirements for integrating with CeFi platforms.
The Bybit Earn integration leverages Avalon Labs’ 1:1 Bitcoin-pegged token FBTC, developed by DeFi protocol Mantle and Bitcoin-centric crypto developer Antalpha Prime. These tokens are then bridged onto Ethereum and other blockchains.
Related: Ethena Labs, Securitize launch blockchain for DeFi and tokenized assets
A multi-protocol system
Avalon Labs’ platform accepts FBTC as collateral and lends it at fixed rates. The borrowed USDt stablecoin is then deployed to high-yield strategies through the Ethena Labs synthetic dollar protocol. The assets employed in those strategies include Ethena USD (USDe) and Ethena Staked USD (sUSDE). The announcement claims:
“Returns are stable, secure, and passed back to Bybit Earn users—making Bitcoin a productive asset while maintaining simplicity and risk control.“
In other words, Avalon Labs serves as a bridge between Bybit and the yield-earning potential of Ethena Labs’ protocol. Avalon Labs describes this as a “CeFi to DeFi” bridge.
The news follows Ethena raising $100 million in late February to deploy a new blockchain and launch a token focused on traditional finance. In January, Ethena also announced plans to roll out iUSDe, a product identical to USDe but designed for regulated financial institutions.
Bybit did not respond to Cointelegraph’s inquiries by publication.
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