Aave restricted new deposits and borrowing against $136 million in tokenized Bitcoin after Threshold Network suspended tBTC minting and redemptions. Threshold says the token remains fully backed, but it has not disclosed the security issue or a reopening date.
Aave has restricted new deposits and borrowing against $136 million in tokenized Bitcoin after Threshold Network suspended tBTC minting and redemptions. The Oct. 31 move followed Threshold's decision to halt its Bitcoin bridge during undisclosed security maintenance.
Threshold said in an Oct. 31 update that the token remained fully backed, with approximately 4,320 BTC held in bridge wallets against 4,185 tBTC in circulation. According to Threshold: "tBTC remains fully backed, and no funds have been lost," and investigators found no unauthorized token minting.
However, Threshold has not disclosed the specific security issue or provided a reopening date. It said bridge functionality would return after remediation.
Aave freezes the Ethereum market
Aave risk service provider LlamaRisk recommended an immediate freeze of tBTC on the protocol's Ethereum V3 Core market. Aave's guardian multisig executed the restriction at 10:01 UTC, which stops users from depositing more tBTC or using it to increase borrowing power.
At the time, approximately 1,760 tBTC worth $136.6 million was supplied to the market, roughly 42% of the token's circulating supply. Existing users can still repay loans and withdraw eligible collateral, and liquidations remain active under existing risk parameters.
The restriction covers only the Ethereum Core reserve, because tBTC markets on Base and Arbitrum had already been frozen during earlier asset deprecation rounds.
Gauntlet pulls liquidity
Other DeFi risk managers have also moved to reduce exposure. Gauntlet said its Ethereum Morpho USDC Core vault had approximately 704,000 USDC supplied to a lending market backed by tBTC collateral. The firm placed the market on its emergency exclusion list and withdrew approximately 65,000 USDC, leaving around 640,000 USDC supplied.
Gauntlet warned that the suspension could affect tBTC's secondary-market liquidity and lenders' ability to exit positions during liquidations. Holders who want native Bitcoin must rely on secondary-market buyers while redemptions stay suspended, so a discount to Bitcoin could make collateral liquidations more difficult.
Threshold pledged another security update within 24 hours of its Oct. 31 announcement, or sooner if circumstances change.
Source: CryptoSlate
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