Thirty institutions have joined Aave Arc, the DeFi lending giant’s platform catering to TradFi and crypto firms, the platform said today.
The firms, which signed up on a whitelisted basis, include Galaxy Digital, a financial services firm, CoinShares, a digital asset investment outfit, and Wintermute, a market maker.
Aave Arc is a separate deployment of Aave v2, facilitating familiar crypto asset lending and borrowing services and utilizing an additional smart contract layer that restricts access to permissioned entities. The venture is a bet that investment firms are keen to play in DeFi but don’t want to run afoul of regulatory risks.
Aave Arc is designed to help institutions develop new products and services utilizing digital assets, including “protocol deployments connected to debit cards,” high yield savings accounts, and regulated fiat ramps to DeFi dapps.
Stani Kulechov, Aave’s founder and CEO, said Aave Arc will allow “institutions to participate in DeFi in a compliant way for the very first time.”
Arc’s whitelisting process is managed by qualified third-party entities through community governance voting. Whitelisters are tasked with onboarding institutional users to the platform, in addition to monitoring know-your-customer and anti-money laundering compliance.
Fireblocks, a New York-based crypto custodian serving more than 700 institutions, is currently Arc’s sole approved whitelister, having been approved by the Aave community in November after applying for the role two months prior.
Customers of Fireblocks who undergo the requisite whitelisting process can now access Aave Arc via the custodian’s platform.
“From hedge funds to banks, regulated DeFi tooling could unleash a wave of new products and services such as flash-loans and high-yield deposit accounts,” said Michael Shaulov, CEO of Fireblocks.
Swiss digital asset bank SEBA applied to become the protocol’s second whitelister on Dec. 22. SEBA emphasized its “tight connections to money managers in Switzerland and beyond,” and said Aave Arc can help its own clients access DeFi yields while remaining compliant with their regulatory obligations.
The platform supports money markets for BTC, ETH, AAVE, and USDC at launch, with plans to expand in the future.
Arc was first announced in July, inciting mixed reactions from the crypto community. While some celebrated the blue-chip DeFi protocol positioning itself to unlock institutional capital and a new class of investors, others criticized Aave for devoting resources to developing a closed platform.
The Aave team notes recent research from Blockdata estimating that if 1% of the assets managed by the world’s largest banks were invested into DeFi, almost $1T would be deployed.
Aave is currently the fourth-largest DeFi protocol by cross-chain total value locked with $18B according to DeFi Llama.