Aave's Institutional Lending Plan Faces Risk Due to Complex Structure
Aave's proposed institutional lending business has been scrutinized for its potential risks. The plan involves institutions pledging Bitcoin or Ether as collateral for dollar loans, while Aave's governing organization, the DAO, would initially borrow those dollars against a separate pool of its own crypto assets.
The DAO is considering two funding authorizations: a $25 million issuance bucket for GHO, Aave's stablecoin, and up to $25 million of USDC or USDT borrowing against DAO assets. The combined $50 million request is capacity for lending against BTC and ETH; actual outstanding loans remain undisclosed.
Aave Labs reports approximately $300 million of indicated demand and describes a $20 million lead BTC facility. However, a decline in crypto prices could weaken both collateral pools, while rising stablecoin borrowing costs could narrow the DAO's interest spread.