A cryptocurrency exchange has joined forces with a lending protocol to provide users with Bitcoin yield opportunities.
As mentioned in an announcement on April 14, the centralized decentralized finance (CeDeFi) protocol will now be integrated into the exchange’s yield product, allowing users to earn yield on Bitcoin (BTC) by leveraging its fixed-rate institutional borrowing layer.
Source: Avalon Labs
In March, the lending platform revealed that it had secured at least $2 billion in credit, with the potential for further scaling if necessary. The product enables institutional borrowers to access USDT liquidity without needing to liquidate their Bitcoin assets, all at a fixed borrowing cost of 8%.
Earlier in February, the company indicated plans to explore a Bitcoin-backed debt-focused public fund. The co-founder remarked that the fund could be launched using a Regulation A exemption for U.S. securities:
“We have dedicated years to researching how Regulation A has been utilized in traditional finance and whether it could offer a feasible avenue for crypto firms. Although there are few successful examples in the crypto space, our analysis of prior SEC-approved cases points to a promising path ahead.”
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The convergence of centralized and decentralized finance
The lending platform’s offering is a CeDeFi protocol that sits between decentralized finance (DeFi) and centralized finance (CeFi). Such products, which provide enhanced control over capital flows and access, often have advantages in meeting the regulatory requirements necessary for integration with CeFi platforms.
The Bybit Earn integration utilizes the platform’s 1:1 Bitcoin-pegged token, FBTC, created in partnership with a DeFi protocol and a Bitcoin-centric crypto developer. These tokens are subsequently bridged onto Ethereum and other blockchains.
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A multi-platform ecosystem
The lending platform’s system accepts FBTC as collateral and lends it at fixed rates. The borrowed USDT stablecoin is utilized in high-yield strategies through a synthetic dollar protocol. The assets involved in these strategies include synthetic USD and staked synthetic USD. The announcement states:
“Returns are stable and secure, and are returned to Bybit Earn users—transforming Bitcoin into a productive asset while maintaining simplicity and risk management.”
This essentially positions the lending platform as a bridge between the exchange and the yield-generating potential offered by the synthetic dollar protocol. The platform refers to this as a “CeFi to DeFi” bridge.
This news comes on the heels of a $100 million fundraising round aimed at launching a new blockchain and token geared toward traditional finance. Additionally, there are plans to introduce a product identical to the standard synthetic USD but tailored for regulated financial institutions.
The exchange has yet to respond to inquiries regarding this collaboration.
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