Aave Proposes Isolated Lending Model for Institutional Borrowing
Aave Labs has proposed a new lending model that would allow institutions to borrow stablecoins against their Bitcoin held in custody at Anchorage Digital Bank, without moving the underlying asset onto Aave's public pools.
The proposal, titled 'Custodied Collateral Lending: Aave V4 Isolated Hub & Spoke,' outlines an isolated lending arrangement built on the protocol's upcoming V4 architecture. The Bitcoin collateral would stay offchain with Anchorage while a separate token tracks each borrower's custodied balance onchain.
A component called CustodySync, developed with Chainlink infrastructure, would mint and burn a non-transferable Custodied Collateral Token (CoCT) to mirror changes in the offchain balance. The CoCT is an internal accounting unit required for Aave V4's ERC-20 collateral interface, but it carries no direct claim on the custodied asset.