Bitcoin
Aave Proposes Custodied Collateral Lending Framework for Institutional Bitcoin
Aave Labs has introduced a governance proposal enabling institutional clients to borrow stablecoins against Bitcoin held in qualified third-party custody.
Aave Labs submitted a governance proposal on September 14 detailing Custodied Collateral Lending, a mechanism designed to enable institutional participation without moving assets directly on-chain. The system allows organizations subject to strict internal custody mandates to access decentralized lending markets while retaining assets at designated custodians.
The proposed framework relies on collaboration between digital asset custodian Anchorage and oracle provider Chainlink. Anchorage holds the underlying Bitcoin throughout the loan term, while Chainlink verifies and synchronizes account balances with the blockchain using its CustodySync infrastructure.
Under this model, Aave issues a non-transferable Custodied Collateral Token (CoCT) on an isolated Aave V4 module known as a Spoke. The token reflects the verified custodial balance and functions exclusively as collateral to borrow stablecoins, preventing the asset from being traded or transferred across other venues.
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