Avalon Labs launches Bitcoin-backed USDa stablecoin

Avalon Labs has introduced USDa, a new stablecoin backed by Bitcoin, designed to unlock liquidity for Bitcoin (CRYPTO:BTC) holders without requiring them to sell their holdings.

Built on LayerZero's (CRYPTO:ZRO) cross-chain technology, USDa aims to integrate Bitcoin as an active source of liquidity within both decentralised (DeFi) and centralised (CeFi) financial systems.

USDa enables Bitcoin holders to collateralise their assets in return for stablecoin liquidity at a fixed borrowing rate of 8%.

This approach allows holders to participate in yield-generating activities in DeFi protocols while maintaining ownership of their Bitcoin.

Avalon Labs has designed the USDa supply to scale proportionally with the Bitcoin collateral, a measure intended to maintain the stablecoin’s 1:1 peg with USDT and reduce the risk of depegging.

However, its performance in fluctuating market conditions will be closely observed.

To ensure security and transparency, Avalon Labs has partnered with custodians such as Cobo, Ceffu, and Coinbase Prime.

These partnerships provide institutional-grade custody solutions with publicly accessible addresses for both retail and institutional users.

Avalon Labs’ development of USDa comes as the crypto industry continues to explore Bitcoin-backed financial instruments.

These developments aim to enhance liquidity and expand Bitcoin’s role beyond a passive store of value.

The introduction of USDa could set a precedent for similar solutions within the digital asset space, fostering broader participation in DeFi and CeFi.

Industry experts are expected to discuss these advancements at Benzinga's Future of Digital Assets event on November 19, where leaders will examine the implications of Bitcoin’s growing role in financial frameworks.

At the time of reporting, the Bitcoin price was $87,467.01.