Avalon Labs Explores Bitcoin-Backed Public Fund Under SEC’s Regulation A

Avalon Labs is assessing the feasibility of launching a Bitcoin-backed public debt fund under the U.S. Securities and Exchange Commission’s (SEC) Regulation A framework, the company said in a post on X.

Avalon Labs’ proposed fund would be one of the first Bitcoin-backed lending products structured under Regulation A, a securities exemption allowing companies to raise capital without the full registration requirements of a traditional public offering. Often referred to as a “mini-IPO,” this framework ensures compliance and transparency while broadening access to investment opportunities.

By leveraging this regulatory pathway, Avalon Labs aims to lower the barriers for traditional investors interested in Bitcoin-backed financial instruments. Historically, similar structures have been utilized in real estate investment trusts (REITs) and private debt offerings, but their application to Bitcoin lending remains largely uncharted territory.

Bridging Traditional Finance and Crypto

The move aligns with Avalon Labs’ broader vision of integrating Bitcoin into the regulated financial system. The company has been a key player in the Bitcoin lending market, offering products such as the USDa stablecoin, BTC-backed loans, and a crypto-linked credit card. The potential success of a Bitcoin-backed public fund could further expand Bitcoin’s use case beyond a store of value, reinforcing its role as an income-generating asset.

Co-founder Venus Li, who previously secured SEC approval for a public debt fund in 2021, expressed optimism about the regulatory process:

“While successful precedents in the crypto industry are limited, our analysis of previous SEC-approved cases suggests a viable path forward. The SEC’s role is to protect retail investors and ensure fairness, not to hinder technological progress. We are confident they will assess any future applications objectively,” Li told Cointelegraph.

The initiative arrives at a critical juncture when rising inflation and shifting Federal Reserve policies are reshaping investor sentiment. Market participants now expect only one rate cut in 2025, with the Fed possibly holding steady until 2026, a scenario that could impact risk assets like Bitcoin.

Despite the potential regulatory hurdles, Avalon Labs’ exploration of a Bitcoin-backed fund highlights the growing convergence of crypto and traditional finance. With increasing institutional interest in Bitcoin and evolving regulatory frameworks, the initiative could provide retail investors with a structured entry point into the digital asset space.

Beyond this initiative, Avalon Labs continues to expand its presence in the Bitcoin lending market. The company raised $10 million in a Series A funding round in December, led by Framework Ventures, with participation from UXTO Management, Presto Labs, and Kenetic Capital. These funds are earmarked for scaling its decentralized finance (DeFi) ecosystem on Bitcoin, enhancing existing products, and launching new financial solutions.

According to DeFiLlama data, Avalon Labs’ total value locked (TVL) peaked at $2.05 billion on January 31 before adjusting to $1.77 billion as of February 12. Its stablecoin USDa, with a market cap exceeding $271 million, continues to provide liquidity solutions for BTC holders.