Aave Arc to Provide 30 Financial Institutions Access to Private Pools of DeFi Liquidity

A permissioned version of the Aave protocol, Aave Arc targets “whitelisted” entities who want to interact with DeFi capital in a compliant way


Stani Kulechov, Founder and CEO of AAVE | Blockworks exclusive art by Axel Rangel


key takeaways

  • The permissioned Aave Arc has the same features as Aave Protocol and fits within the KYC and AML compliance standards
  • A total of about $254 billion is locked in DeFi, according to data from DeFi Llama, of which, around $14.45 billion is on Aave

A permissioned version of the DeFi liquidity protocol, Aave Arc, launched today and Fireblocks “whitelisted” 30 financial institutions to participate in it. 

“Aave Arc allows institutions to interact with the Aave Protocol the same way any other user would, but on their own separate and permissioned liquidity pool where every user has been verified,” Stani Kulechov, founder & CEO of Aave told Blockworks. 

The permissioned Aave Arc has the same features as Aave Protocol and fits within the KYC and AML compliance standards, Kulechov said. “​This allows institutions to leverage almost all the benefits of DeFi while remaining aligned with their compliance requirements,” he added. 

Among the institutions are Anubi Digital, Bluefire Capital (acquired by Galaxy Digital), Canvas Digital, Celsius, CoinShares, GSR, Hidden Road, Ribbit Capital, Covario, QCP Capital and Wintermute. 

Since launching in June 2020, the institutional digital asset custody company Fireblocks has amassed over 500 liquidity partners who actively move assets across 30 of the world’s largest digital asset exchanges, such as Binance, Bitfinex, Coinbase, FTX and more, Blockworks previously reported. Fireblocks’ 2021 year-end review touts $40 billion in assets under management with the company.

Aave Protocol is owned and governed by over 100,000 AAVE token-holders who can create and vote on proposals to change or update the protocol, Kulechov said. 

While the Aave governance system will also govern the permissioned Aave Arc, the only difference is that whitelisters have a “guardian” role, which allows them to veto a proposal only if it’s necessary for regulatory and compliance obligations, he said. 

The 30 companies volunteered to become “whitelisted” and some were existing Fireblocks customers while others were new customers who came on board, Jason Allegrante, chief legal and compliance officer at Fireblocks said to Blockworks.

The opportunity

There’s about $254 billion in total valued locked across decentralized finance, according to data from the TVL aggregator DeFi Llama. Aave is one of the largest decentralized borrowing and lending platforms throughout the entire DeFi ecosystem, with more than $14.45 billion of TVL,  as of Wednesday

The market has been largely untouched by financial institutions due in part to compliance requirements. By creating this alternative private pool to meet regulatory standards, it could unlock a trillion dollar opportunity over the next half decade, according to data from blockchain research firm Blockdata. 

Figures from September 2021

“We’re bringing the world of DeFi to the institutions because they can’t come to it in its decentralized form,” Allegrante said. “It’s a hybrid solution and puts the protocol and all the interesting things it does as a centralized gateway to the protocol. The technology is still what it is, but building a permissioned environment around it,” he added. 

In the future, other regulated entities will be considered to be approved as whitelisters for Aave Arc, both Kulechov and Allegrante said. There are some entities that have already submitted their applications to the Aave Governance forum to become whitelisters, Kulechov noted.

“I do hope we can trend toward a fully decentralized future, but we have to realize the opportunity we have before us by bringing DeFi to institutions,” Allegrante said. “If you look at DeFi and what it could do, we may be looking at the next wave of institutional adoption here,” he added.

This story was updated on Jan. 10, 2022 at 7:00 AM to correct the name of Anubi Digital.

Get the day’s top crypto news and insights delivered to your inbox every evening. Subscribe to Blockworks’ free newsletter now.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

MON - WED, MARCH 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience:  Attend expert-led panel discussions and fireside chats  Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts   Grow your network […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Frax report cover.jpg


Frax saw continued development in its frxETH liquid staking derivative and Fraxlend money market throughout 2023. Frax V3 introduces an RWA strategy to drive utility to the protocol's cornerstone product, the FRAX stablecoin.


MicroStrategy discloses the purchase of 16,000 bitcoin throughout November


Digital asset firms face potential new regulatory landscape under Treasury’s proposed authority expansion


Uniswap Labs will be providing trading APIs to Talos investors through Fireblocks


DYDX supply will climb by up to 80% after the Friday unlock, but a couple factors make a massive sell-off appear unlikely


Switzerland-based Pando Asset, which has crypto products trading on the SIX Swiss Exchange, now looks to the US


Binance does not hold the required licenses to advertise and serve customers in the Philippines, the country’s securities regulator said