Defi Lending Startup Aave Launches Permissioned Platform to Entice Financial Institutions

On January 5, the open-source non-custodial decentralized finance (defi) lending platform Aave launched a permissioned version of the protocol aimed at institutions. The platform dubbed Aave Arc will leverage Fireblocks as the first whitelister as the platform aims to help bridge traditional financial institutions with defi.

KYC-Centric Defi Liquidity: Aave Launches Aave Arc Permissioned Protocol for Financial Institutions

Aave has launched a permissioned platform called Aave Arc on Wednesday, a new protocol dedicated to financial institutions that want to particpitate in defi in a compliant manner. Aave is a popular defi lending platform and the defi protocol has the third-largest total-value locked (TVL) today. Metrics show that Aave has a $14.52 billion TVL spread across three blockchains including Ethereum, Avalanche, and Polygon.

The crypto custody firm Fireblocks has approved 30 financial entities to join Aave Arc. The list includes firms like Ribbit Capital, Coinshares, Hidden Road, Wintermute, and Celsius. Aave revealed the Aave Arc concept in July 2021, and in mid-November it was disclosed that Fireblocks was the first whitelister. The defi startup also described how Aave Arc would work after explaining that defi was “inaccessible to traditional financial institutions.”

“Aave Arc is a permissioned market based on the Aave V2 market,” Aave said at the time. “In the spirit of innovation and experimentation, Aave Arc creates a Web3-native experience for financial institutions to harness the power of defi in a permissioned sandbox environment.” The defi startup added:

True to the values of defi, Aave Arc is designed to be fully decentralized and governed by Aave Governance. ‘Whitelisters’ that KYC and onboard institutions and corporations onto Aave Arc can be appointed or removed by Aave protocol governance.

Essentially, the new platform allows traditional finance companies to participate with the Aave system but leverage a permissioned liquidity pool. The crypto custody firm Fireblocks believes that more institutions will embrace cryptocurrency and the belief is the company’s top prediction for 2022. “Institutional interest in crypto will accelerate in 2022,” Fireblocks says in a blog post.

“This adoption will gain more momentum from developments in post-trade infrastructure that are currently being implemented across the marketplace,” Fireblocks 2022 prediction post adds.

Aave’s native crypto asset, aave (AAVE) has a market valuation of around $3.47 billion on January 5, 2022, and $294 million in global trade volume. Weekly stats show AAVE is up over a percent, two-week metrics indicate the asset has gained 38.1% and year to date, AAVE has gained 135%.