Aave Has Launched Permissioned DeFi Pools for Institutions

Key Takeaways

Aave has launched its institutional product, Aave Arc.
It will initially be open to 30 institutions that have been whitelisted by Fireblocks.
Bitcoin and Ethereum saw a wave of institutional interest amid crypto’s 2021 boom, but DeFi is still unexplored territory to most institutions.

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Aave has opened its regulated DeFi product to 30 institutions with the help of Fireblocks.

Aave Rolls Out Institutional Offering

Aave has launched its institutional product.

The DeFi project, which is currently the largest lending protocol in the crypto ecosystem, has opened its new Aave Arc offering up to 30 investment firms in partnership with Fireblocks.

Aave Arc will cater to financial institutions and corporates, giving them a way to borrow digital assets and capture the high yields DeFi offers within a sandboxed regulatory environment. Unlike its regular non-custodial protocol, the liquidity pools in Aave Arc are permissioned, meaning that any institution looking to use the service must be whitelisted first. Fireblocks is responsible for completing the necessary checks to onboard each firm by following KYC/CDD/EDD principles and the Financial Action Task Force’s guidelines. 

Michael Shaulov, the CEO of Fireblocks, commented on the partnership, noting that “regulated DeFi tooling could unleash a wave of new products and services such as flash-loans and high-yield deposit accounts.”

Aave Arc will initially be open to 30 whitelisted institutions, including Anubi Capital, Bluefire Capital, Canvas Digital, Celsius, CoinShares, GSR, Hidden Road, Ribbit Capital, and Covario QCP Capital, and Wintermute.  

Since launching on Ethereum, Aave has seen huge success, attracting over $26 billion in total value locked. In 2021, it expanded to Polygon and Avalanche amid rising demand for DeFi on lower-cost alternatives to Ethereum. Aave Arc will give institutions access to its popular borrowing and lending services, but it will be segregated from its retail markets.

The new product has been in development since the second quarter of 2021. In a press release, Aave founder and CEO Stani Kulechov said that DeFi had been “inaccessible to traditional financial institutions for far too long,” and that the rollout would help them “participate in DeFi in a compliant way for the very first time.” 

Institutional interest in crypto soared in 2021 as the space saw rapid growth. After the likes of MicroStrategy made corporate investments in Bitcoin, major banks such as JPMorgan and Morgan Stanley announced plans to offer Bitcoin products for wealthy clients. While Ethereum has also attracted the attention of some larger players, institutions have largely DeFi has largely remained on the sidelines of DeFi. However, products like Aave Arc could soon change that.

Meltem Demirors, Chief Strategy Officer at CoinShares, described institutional participation in DeFi as “inevitable,” adding that CoinShares was “excited to support Aave Arc to unblock the next wave of institutional capital by bringing safer, more convenient access to new market structure.” 

Aave is not the only DeFi lending protocol that’s aiming to cater to growing institutional demand. In June, Compound unveiled a similar institutional product called Treasury that offers investors high-yield interest on USDC stablecoin markets. As more DeFi projects look to roll out new offerings catering to the institutional market, it’s likely that an increasing number of major players will enter the space as its grows. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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