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Aave passes native Bitcoin lending proposal, but hidden liquidation risks remain

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Aave passes native Bitcoin lending proposal, but hidden liquidation risks remain

Aave's plan to let users borrow stablecoins against native Bitcoin passed an early governance vote and awaits final approval before launch.

Aave's proposal to let holders borrow stablecoins against native Bitcoin cleared its preliminary ARFC governance vote on Nov. 9, according to Babylon Labs.

The borrowing market still needs final approval before holders can use it on mainnet. Babylon reported 100% support for the plan to connect its Trustless Bitcoin Vaults to Aave V4, and the next step is an Aave Improvement Proposal (AIP) for final on-chain approval.

Babylon reports ARFC passage on Nov. 9. Final AIP approval and a restricted mainnet rollout remain ahead.

BTC stays locked on Bitcoin; Aave recognizes collateral on Ethereum and lends supported stablecoins.

The permissionless route uses WBTC now and native BTC redemption later. This remains a proposed design with liquidation risk.

Native BTC would back stablecoin loans, while WBTC still has a separate liquidation-settlement role.

Vote result attributed to Babylon. Late-2026 target remains conditional. Credit limits are proposed capacity. Diagrams omit operator and governance detail; liquidation risk and WBTC dependencies remain.

Reported governance stages are arranged in sequence, without duration or probability scaling. Selectable diagrams explain two different proposed mechanisms; no forecast or live-liquidity calculation is shown.

Vote result attributed to Babylon. Late-2026 target remains conditional. Credit limits are proposed capacity. Diagrams omit operator and governance detail; liquidation risk and WBTC dependencies remain.

Under the proposed change, BTC would remain locked on Bitcoin, while an Ethereum-based accounting record would let Aave recognize it.



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