Aave Labs has proposed an isolated Aave V4 lending market letting institutions borrow stablecoins against Bitcoin held at custodian Anchorage, without moving the coins onchain. A new system called CustodySync would mirror the custodied balance through a non-transferable token, and Anchorage itself would handle any liquidation.
Aave Labs proposes custodied Bitcoin collateral
Aave Labs posted the ARFC titled "Custodied Collateral Lending: Aave V4 Isolated Hub & Spoke" to the Aave Governance Forum on September 14, 2026, with an initial focus on Bitcoin held by Anchorage. Under the proposal, institutions could borrow stablecoins against that Bitcoin without depositing the underlying collateral into an onchain Aave market. The collateral would stay in institutional custody offchain, while a separate token would represent each borrower's custodied balance in an isolated onchain Aave lending position.
CoinDesk reported that the market would use Aave V4's hub-and-spoke structure as an isolated lending arrangement, separate from Aave's existing permissionless markets. The Bitcoin collateral would not be held by Aave, Chainlink or CustodySync — it would remain with Anchorage rather than being supplied to a public onchain pool, while the borrowing position would be represented and settled through the isolated Aave V4 market. The proposal remains subject to Aave DAO governance approval, CoinDesk reported.
CustodySync would mirror balances with a non-transferable token
CustodySync, developed with Chainlink infrastructure, would connect offchain custody records to the isolated Aave V4 market by representing each borrower's custodied balance through a non-transferable Custodied Collateral Token (CoCT). Anchorage would hold the Bitcoin, Aave V4 would host the stablecoin borrowing position, and CustodySync would update the CoCT as the custody balance changed.
The CoCT would be minted and burned as that balance changed, without moving the underlying Bitcoin into the protocol. It would instead give the Aave position an onchain representation of collateral while the asset stayed outside the custody of Aave, Chainlink and CustodySync. Because the token corresponds to a particular borrower's custodied balance, it is intended to remain non-transferable rather than circulate independently.
Anchorage would handle liquidation through an OTC sale
Liquidation would depart from the public onchain auction model used in many crypto lending systems. If a position needed to be liquidated, Anchorage would conduct an over-the-counter sale of the underlying collateral, with the proceeds used to settle the associated onchain Aave position, rather than onchain liquidators acquiring collateral in a public auction.
Anchorage's existing Atlas documentation describes a collateral-management service for institutional crypto-secured transactions that includes segregated custody, automated loan-to-value monitoring, margin calls and liquidation coordination — capabilities that align with the custody, monitoring and liquidation roles outlined in the Aave proposal.
The ARFC's next meaningful test is governance approval. If approved, it would establish an Aave V4 model in which Bitcoin remains at Anchorage throughout the collateral lifecycle, including an OTC liquidation, while a non-transferable onchain token supports the isolated stablecoin borrowing position.
Sources: Aave Governance Forum, Crypto Daily™
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