AVALON LABS EXPLORES FIRST BITCOIN-BACKED PUBLIC DEBT FUND UNDER SEC FRAMEWORK

Last updated: June 19, 2025, 18:26 | Written by: Chris Larsen

Imagine a world where your Bitcoin holdings could generate a steady stream of income, all while operating within the established regulatory framework of the United States Securities and Exchange Commission (SEC). 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 2025, expressed optimism about the regulatory process:Avalon Labs, a company at the forefront of on-chain Bitcoin finance, is working to make this vision a reality. Avalon Labs says it is exploring the possibility of filing the industry s first Bitcoin-backed debt public fund aligned with SEC regulations. After issuing the world s first Bitcoin (BTC)-backed stablecoin USDa, Avalon Labs wants to expand their suite of financial products pegged to the BTC. OnThey're exploring the launch of a groundbreaking Bitcoin-backed public debt fund, potentially opening up a new avenue for both crypto enthusiasts and traditional investors alike.This innovative fund aims to bridge the gap between the burgeoning digital asset space and conventional financial markets, bringing much-needed regulatory oversight and legitimacy to the world of Bitcoin-backed lending. Avalon Labs is taking a significant step towards bridging the gap between traditional finance and the digital asset world with the announcement of its exploration into creating the first-ever Bitcoin-backed public debt fund. The initiative aims to expand Bitcoin s role beyond being a store of value and into the realm of more conventionalBy leveraging the SEC's Regulation A exemption, Avalon Labs hopes to create a structured investment vehicle that integrates Bitcoin into mainstream finance, expanding its use case beyond just a store of value. While still in the exploratory phase, Avalon is assessing whether it can use the SEC Regulation A Exemption to launch the debt-focused public fund backed by Bitcoin. The Regulation A Exemption under the Securities Act of 2025 enables private companies, trusts, and fund managers to access public markets and issue securities to retail investorsThis bold move could pave the way for wider adoption of Bitcoin as an income-generating asset, attracting a broader range of participants to the Bitcoin ecosystem. Avalon Labs, a company focused on building on-chain financial products for Bitcoin (BTC), is exploring the possibility of launching a first Bitcoin-backed debt-focused public fund in the US.The potential success of such a fund could mark a significant milestone in the evolution of Bitcoin, solidifying its role in the global financial landscape.

What is Avalon Labs Proposing?

Avalon Labs is proposing the creation of a Bitcoin-backed public debt fund, a first-of-its-kind investment vehicle designed to provide a regulated pathway for investors to participate in Bitcoin-backed lending. Avalon Labs explores creating the first Bitcoin-backed debt fund to bridge traditional finance and digital assets - IcoHolder. Avalon Labs is taking a significant step towards bridging the gap between traditional finance and the digital asset world with the announcement of its exploration into creating the first-ever Bitcoin-backed public debtThis initiative is significant because it aims to operate under the watchful eye of the SEC, specifically leveraging the Regulation A exemption. Avalon Labs is working to introduce Bitcoin-backed financial products for both crypto enthusiasts and mainstream users. The company aims to develop a Bitcoin-backed public debt fund that complies with SEC regulations. Main points include: Avalon views Bitcoin as Digital Gold and sees an opportunity due to increased institutional adoption and recent spot Bitcoin ETF issuances. The initiativeThis exemption allows companies to raise capital from the public without the full registration requirements typically associated with a traditional public offering.In essence, it lowers the barrier to entry for both the fund and potential investors.

The core idea is to use Bitcoin as collateral for debt instruments, creating a fund that generates returns through interest payments on those loans. TokenReserve LAYEROnBinance . In traditional financial markets. Febru Avalon Labs is exploring the possibility of creating a public fund focused on Bitcoin-backed debt, and assessing its potential compliance with the SEC s exemption from Regulation A.Avalon Labs views Bitcoin as ""Digital Gold"" and believes that the increasing institutional adoption of Bitcoin, coupled with the recent approval of spot Bitcoin ETFs, creates a favorable environment for such a fund.

Understanding the SEC's Regulation A Exemption

The Regulation A exemption, often referred to as ""Regulation A+"", is a set of rules established by the SEC that allows smaller companies to raise capital from the public in a more streamlined manner than a traditional IPO.It's designed to make it easier for businesses to access funding while still providing investor protection.

Key features of Regulation A include:

Two Tiers: Regulation A has two tiers: Tier 1 and Tier 2. Avalon Labs is evaluating the launch of a bitcoin-backed public debt fund, exploring its alignment with SEC Regulation A.Tier 1 allows companies to raise up to $20 million in a 12-month period, while Tier 2 allows them to raise up to $75 million.
Simplified Filing Process: The filing process is less burdensome than a traditional registration statement, making it more accessible for smaller companies.
Investor Protection: Regulation A still requires companies to provide investors with detailed information about their business, financials, and the offering itself.
Potential for Retail Investors: Regulation A allows companies to solicit and sell securities to both accredited and non-accredited investors, opening up investment opportunities to a wider audience.

By exploring the Regulation A exemption, Avalon Labs is aiming to create a fund that is accessible to a broad range of investors while adhering to regulatory requirements, ensuring transparency and investor protection. 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.In the event of SEC approval, it would be one of the first products of its kind.

Why is This Significant for the Bitcoin Ecosystem?

The potential launch of a Bitcoin-backed public debt fund under the SEC framework is a significant development for several reasons:

Bridging Traditional Finance and Digital Assets: It represents a concrete step towards integrating Bitcoin into the traditional financial system, making it more accessible and appealing to mainstream investors.
Expanding Bitcoin's Use Case: It moves Bitcoin beyond being solely a store of value and establishes it as an income-generating asset, increasing its utility and attractiveness.
Regulatory Compliance: Operating under the SEC's framework provides regulatory oversight and legitimacy, which can increase investor confidence and reduce risk.
Increased Adoption: By lowering the barriers to entry for traditional investors, it can encourage broader adoption of Bitcoin-backed financial products and Bitcoin itself.

In essence, this initiative has the potential to transform how Bitcoin is perceived and used in the financial world, solidifying its position as a key player in the future of finance.

How Would the Fund Work?

While specifics are still under development, we can infer the general mechanism of the fund based on the available information:

Bitcoin Collateralization: Investors would deposit Bitcoin into the fund.This Bitcoin serves as collateral for the debt instruments issued by the fund.
Debt Issuance: The fund issues debt instruments (e.g., bonds or notes) to investors. In its latest announcement, Avalon Labs said it is looking towards potentially launching a Bitcoin-Backed Public Debt Fund. Avalon intends to file the Bitcoin product under the US Securities and Exchange Commission (SEC) Regulation A framework.These instruments represent a claim on the fund's assets, including the Bitcoin collateral.
Lending Activities: The fund uses the capital raised from debt issuance to make loans to borrowers.These loans are typically over-collateralized with Bitcoin.
Interest Payments: Borrowers pay interest on the loans, which generates income for the fund.
Distribution of Returns: The fund distributes the interest income to debt holders as returns on their investment.
Regulatory Compliance: Throughout the process, the fund operates in compliance with SEC regulations, including reporting requirements and investor protection measures.

Example: Let's say an investor deposits 1 BTC into the fund. Avalon Labs is exploring the possibility of a Bitcoin-backed debt-focused public fund, assessing its potential alignment with the SEC s Regulation A exemption.The fund then issues debt instruments backed by that BTC, and uses the raised capital to make a loan to a borrower who provides additional BTC as collateral. Cointelegraph Avalon Labs explores first Bitcoin-backed public debt fund under SEC framework News InsideBitcoins.com New Cryptocurrency Releases, Listings, Presales Today Avalon Labs, Cadabra Finance, Alvalanche DeFAI AgentsThe borrower pays interest on the loan, and the fund distributes that interest to the initial investor who deposited the 1 BTC. Avalon Labs Files for First Bitcoin-backed Debt Public Fund with US SECThe fund also ensures compliance with all relevant SEC regulations throughout the process.

Risks and Challenges

Despite the potential benefits, there are also risks and challenges associated with a Bitcoin-backed public debt fund:

Regulatory Uncertainty: The regulatory landscape for crypto assets is still evolving, and there is a risk that new regulations could impact the fund's operations.
Bitcoin Volatility: The price of Bitcoin is notoriously volatile, which could affect the value of the collateral and the fund's ability to meet its obligations.
Smart Contract Risk: If the fund uses smart contracts to manage its operations, there is a risk of bugs or vulnerabilities that could be exploited by hackers.
Counterparty Risk: The fund relies on borrowers to repay their loans, and there is a risk that borrowers could default, leading to losses for the fund.

Avalon Labs will need to carefully manage these risks to ensure the fund's long-term success.

The Role of Venus Li

A key figure in this initiative is Venus Li, the co-founder of Avalon Labs.Her previous experience securing SEC approval for a public debt fund in 2025 is a significant advantage.This prior experience provides Avalon Labs with valuable insights into the regulatory process and increases the likelihood of success. The Bitcoin-backed public debt fund would be built within the framework of the U.S. Securities and Exchange Commission (SEC), which would bring regulatory oversight and legitimacy to the project. If successfully implemented, it could lower the entry barriers for traditional investors, encouraging a broader adoption of Bitcoin-backed financialHer understanding of the SEC's requirements and her ability to navigate the regulatory landscape will be crucial in bringing this Bitcoin-backed public debt fund to fruition.

Avalon Labs' Vision for Bitcoin

Avalon Labs views Bitcoin as more than just a speculative asset.They see it as ""Digital Gold"" with the potential to play a much larger role in the global financial system. In a bold move to expand the adoption of Bitcoin as a financial asset, Avalon is exploring the development of a Bitcoin-backed public debt fund under the US Securities and Exchange CommissionTheir vision is to create a suite of financial products that leverage Bitcoin's unique properties, such as its scarcity and decentralization, to provide new and innovative investment opportunities. Avalon Labs is pioneering efforts to expand bitcoin s role in the financial sector by exploring a regulated bitcoin-backed public debt fund. According to a post on its official X handle, the initiative aims to create a structured investment vehicle that integrates bitcoin into traditional finance while maintaining regulatory compliance underThe development of a Bitcoin-backed public debt fund is a key part of this vision, as it aims to unlock the potential of Bitcoin as an income-generating asset and bridge the gap between traditional finance and the digital asset world.

Potential Benefits for Investors

The launch of a Bitcoin-backed public debt fund could offer several potential benefits for investors:

Diversification: It provides investors with a new way to diversify their portfolios and gain exposure to Bitcoin without directly holding the asset.
Income Generation: It allows investors to earn a yield on their Bitcoin holdings, generating a steady stream of income.
Regulatory Oversight: Operating under the SEC's framework provides investor protection and reduces risk.
Accessibility: Regulation A makes it accessible to both accredited and non-accredited investors.

However, it's important for investors to carefully consider the risks associated with such a fund before investing.

How does this compare to Bitcoin ETFs?

While both Bitcoin ETFs and Bitcoin-backed debt funds offer exposure to Bitcoin, they serve different purposes and have distinct characteristics.

Bitcoin ETFs

Objective: Primarily designed to track the price of Bitcoin.
Mechanism: Holds Bitcoin directly (in the case of spot ETFs) or Bitcoin futures contracts.
Return: Investors profit from the appreciation of Bitcoin's price.
Risk: Primarily subject to the volatility of Bitcoin's price.
Income: Generally does not generate income unless the ETF engages in activities like staking (which is not common for US-based ETFs).

Bitcoin-Backed Debt Funds

Objective: To generate income by lending out capital collateralized by Bitcoin.
Mechanism: Holds Bitcoin as collateral and issues debt instruments to raise capital for lending.
Return: Investors earn interest on the debt instruments they hold.
Risk: Subject to Bitcoin's volatility but also to credit risk (the risk that borrowers default).
Income: Designed to generate a steady stream of income for investors.

In essence, Bitcoin ETFs are a way to gain exposure to Bitcoin's price movements, while Bitcoin-backed debt funds are a way to earn income from Bitcoin lending.They cater to different investment goals and risk profiles.

Future Implications and the Broader Market

If Avalon Labs successfully launches its Bitcoin-backed public debt fund, it could have significant implications for the broader market:

Increased Institutional Interest: A regulated and accessible Bitcoin-backed debt fund could attract more institutional investors to the cryptocurrency space.
Validation of Bitcoin as Collateral: This would further validate Bitcoin as a viable form of collateral in financial transactions.
Innovation in Crypto Finance: It would encourage further innovation in the development of regulated crypto financial products.
Mainstream Adoption: It could contribute to the broader adoption of cryptocurrencies by making them more accessible and understandable to traditional investors.

The success of this initiative could pave the way for a new era of crypto finance, where digital assets are seamlessly integrated into the traditional financial system.

The Current Status of the Project

It is important to remember that Avalon Labs' exploration of a Bitcoin-backed public debt fund is still in the preliminary stages.While the company has announced its intentions and is actively assessing the feasibility of the project, there is no guarantee that it will ultimately come to fruition.The regulatory approval process can be complex and time-consuming, and there are many factors that could impact the fund's viability. Avalon Labs has decided to explore the uncharted territory of Bitcoin-backed lending products by leveraging SEC s Regulation A framework. Barely a day after Avalon Labs announced the listing of its native token, AVL, on Bybit s Spot trading platform, the company has announced it is considering launching a Bitcoin-backed public fund underIt is essential to follow official announcements to keep track of how the project is progressing.

Answering Common Questions

What exactly is a Bitcoin-backed public debt fund?

It's a fund that uses Bitcoin as collateral to secure debt instruments (like bonds or notes).The fund then lends out the capital raised from issuing these debt instruments, and the interest earned is distributed to the investors who hold the debt.

How is this different from simply buying and holding Bitcoin?

Buying and holding Bitcoin is a direct investment in the asset, hoping for its price to appreciate.A Bitcoin-backed debt fund aims to generate income from Bitcoin by lending it out, rather than relying solely on price appreciation.

What are the main risks involved?

The main risks include the volatility of Bitcoin's price, regulatory uncertainty, smart contract vulnerabilities (if applicable), and the risk of borrowers defaulting on their loans.

Who is this fund aimed at?

Avalon Labs is aiming to create a fund that is accessible to both crypto enthusiasts and traditional investors, bridging the gap between the two worlds.

What is Regulation A, and why is it important?

Regulation A is an SEC exemption that allows smaller companies to raise capital from the public without the full registration requirements of a traditional IPO.It's important because it lowers the barrier to entry for both the fund and potential investors, making it more accessible.

Conclusion: A Step Towards Mainstream Bitcoin Finance

Avalon Labs' exploration of a Bitcoin-backed public debt fund under the SEC framework represents a significant step towards mainstream adoption of Bitcoin.By leveraging the Regulation A exemption and integrating Bitcoin into a regulated investment vehicle, Avalon Labs aims to unlock the potential of Bitcoin as an income-generating asset and bridge the gap between traditional finance and the digital asset world. News Summary: Avalon Labs is evaluating the launch of a bitcoin-backed public debt fund, exploring its alignment with SEC Regulation A. U.S. SEC Framework Could Provide Structure for Bitcoin-Backed Debt Fund Avalon Labs is pioneering efforts to expand bitcoin s role in the financial sector by exploring a regulated bitcoin-backed public debt fund. According to a post on [ 8230;] - BitcoinWhile risks and challenges remain, the potential benefits for investors and the broader market are substantial.Key takeaways include:

Innovation: This initiative represents a groundbreaking approach to Bitcoin finance.
Regulation: Operating under SEC regulations provides investor protection and legitimacy.
Accessibility: Regulation A opens up investment opportunities to a wider audience.
Potential: This could pave the way for increased institutional adoption of Bitcoin and further innovation in the crypto space.

Keep an eye on this space as Avalon Labs navigates the regulatory landscape and works to bring this innovative product to market. Bitcoin Exchange Inflows Hit 5-Year Peak What It Means for BTC Price Avalon Labs Explores Filing for Revolutionary Bitcoin-Backed Debt Fund Global Focus Financial NewsThe success of this initiative could mark a turning point in the evolution of Bitcoin as a mainstream financial asset.