A new Aave Request for Comment proposes a dedicated Aave V4 market designed for institutions that want to borrow stablecoins against assets kept with a regulated custodian rather than moved onchain. The plan would use Anchorage as custodian and Chainlink infrastructure to keep the offchain custody records and onchain lending position aligned throughout the life of a loan.

Under the proposal, collateral deposited with Anchorage would be represented onchain by a non-transferable Custodied Collateral Token, or CoCT. The token would be minted and burned through Chainlink’s CustodySync system, then posted on an isolated Aave V4 Spoke to draw stablecoin liquidity from a separate Isolated Hub governed by the Aave DAO.

How the structure would work

The ARFC is limited to a single new Isolated Hub and a single Spoke, with no changes to Aave’s existing Hubs, Spokes, or reserves. The design relies on Aave V4’s Hub-and-Spoke architecture to keep this market ring-fenced from other Aave liquidity venues while leaving the DAO in control of parameters, caps, and listings.

Anchorage would remain the holder of the underlying collateral for the duration of the loan and would operate the collateral management system that serves as the source of truth for balances and loan lifecycle events. The proposal says the collateral never moves onchain and is never held by Chainlink, CustodySync, or Aave.

Chainlink would act as the orchestration layer. Its Runtime Environment workflows would reconcile custody data with protocol state, maintain an onchain Proof of Reserve record of the custodied balance, and synchronize updates between the custodian’s systems and Aave so both sides can independently verify the same position data.

Role of the CoCT token

The Custodied Collateral Token is described as an internal accounting tool needed to fit the custody arrangement into Aave V4’s ERC-20 collateral interface. It would not be tradable or transferable in the usual sense and would not grant a direct claim on the underlying asset, with legal recourse instead running through the collateral account control agreement.

Each borrower position would have its own CoCT contract and exactly one authorized CustodySync instance. Minting and burning power would sit only with CustodySync, and transfers would be restricted to a fixed allowlist that covers the Aave V4 Hub, the Spoke, and the CustodySync itself.

The token supply would track the borrower’s custodied balance, while also accounting for any liquidation commitments that are open during a settlement window. Rather than replay every event, the system would periodically reconcile to the correct target state, which the proposal says makes missed or delayed events self-correcting on the next sync cycle.

Borrowing and liquidation flow

Borrowers would not interact directly with the Spoke. Instead, they would call the CustodySync bridge to borrow, and the stablecoins would be routed from the Spoke to the borrower in the same atomic transaction. Repayments could be initiated by either the borrower or the custodian wallet, while interest accrual would be read from Aave on a fixed schedule and written back to the custodian’s system.

Liquidation would not happen through a standard onchain auction of the underlying collateral. The proposal says Anchorage, as custodian, would execute liquidation as an over-the-counter sale of the offchain collateral, then use the proceeds to settle the onchain position. Partial liquidations would be supported, with each commitment tied to a unique liquidation ID.

During the settlement window, committed proceeds would be recorded onchain and reflected in the CoCT price so the position is not liquidated again while the custodian-controlled process is under way. Final settlement would be atomic: debt repayment, CoCT withdrawal, token burn, and commitment clearing must all succeed together or the transaction reverts.

Initial scope and governance path

The first proposed listing is a single CoCT instance representing BTC pledged as collateral and held in Anchorage custody. Structural policy in the ARFC would keep CoCT permanently non-drawable at the Hub level through a zero draw cap, while CoCT reserves on the Spoke would be non-borrowable. The add cap for each CoCT reserve would be sized to the individual borrower’s custody position.

The proposal notes that risk settings are not yet final. Collateral factor, liquidation bonus and fee, target health factor, supply and borrow caps, interest rate strategy, and oracle configuration are expected to be recommended by Aave DAO risk service providers before any AIP is submitted.

The next confirmed step is community and service-provider feedback on the ARFC, including the isolated Hub and Spoke deployment, CoCT listing, onboarding permissions, and risk parameters. If sentiment is positive, the proposal would move to a Snapshot vote and then to an Aave Improvement Proposal for onchain approval and execution.

Source: governance.aave.com