Aave protocol lending and collateral proposals

Aave has introduced several proposals aimed at expanding its lending capabilities and managing collateral across different markets.

In September 2026, Aave Labs proposed an institutional lending model for Aave V4. This framework, titled ‘Custodied Collateral Lending: Aave V4 Isolated Hub & Spoke’, would allow institutions to borrow stablecoins using Bitcoin held by Anchorage Digital as collateral. To maintain security and compliance, the Bitcoin would remain in custody, represented on-chain by a non-transferable ‘Custodied Collateral Token’ (CoCT) synchronized via Chainlink’s ‘CustodySync’ technology. This model utilizes an isolated market structure to prevent risk contagion, with liquidations handled through over-the-counter (OTC) markets rather than standard on-chain processes.

In October 2026, the focus shifted to collateral management on the X Layer market, where Aave considered a proposal to rollover USDG collateral. The plan involves replacing an expiring PT-USDG-29OCT2026 token with a new PT-USDG-25FEB2027 token. Analysis of the proposal noted that the new token’s implied yield of approximately 2.79% to 2.98% is lower than current borrowing rates for several stablecoins on the platform, potentially creating negative carry for leveraged positions.