Aave has launched a licensed DeFi platform for institutions

The decentralized financial platform Aave has launched the licensed DeFi lending platform Aave Arc, and the encrypted custodian Fireblocks has become the first whitelist of Aave Arc.

Aave Arc works in the same way as Aave’s agreement, but only after approval can you participate. Aave Arc will initially support four assets: ETH, WBTC, USDC and AAVE. Fireblocks will conduct due diligence on institutions that wish to lend or borrow crypto assets through the platform.

Michael Shaulov, co-founder and CEO of Fireblocks, said that the launch of Aave Arc will enable the world’s largest institutions to start participating in DeFi. Fireblocks will adopt globally recognized KYC and due diligence procedures in accordance with FATF guidelines to incorporate institutions into DeFi.

Currently, Fireblocks has whitelisted 30 organizations to participate in Aave Arc. These include SEBA Bank, Bluefire Capital, Celsius, CoinShares, GSR, Ribbit Capital, QCP Capital and Wintermute.

Previously, Aave’s goal of Aave Arc was disclosed to provide investors with a liquidity pool so that they can directly enter the decentralized market. Due to the regulations that apply when providing products to institutions, these liquidity pools will be separate from the existing pools on Aave and require extensive KYC.

Aave Arc reduces the user’s risk by limiting the initial assets provided. USDC will be the only stable currency available on Aave Arc. USDC is strictly regulated. From the perspective of risk management, it is a stable currency suitable for institutions.

In addition, the private fund pool on Aave Arc may have a different interest rate from the public fund pool on Aave V2. After Aave Arc is launched, there will be arbitrage opportunities for those who have the opportunity to enter these two fund pools.

If Aave Arc succeeds and other agreements follow its model, then as the agreement outsources KYC requirements to a centralized third party, there may be systematic growth of centralization, and liquidity may be divided between institutional and retail asset pools. .

Aave Arc’s goal is to introduce institutions into the DeFi ecosystem, but it is not the only product launched for institutional DeFi adoption.

Compound’s latest product, Compound Treasury, also allows institutions to provide U.S. dollars to their Compound Treasury accounts, thereby obtaining a 4% annual return from the Compound agreement.

Compared with Aave Arc, Compound Treasury’s goal is to allow institutions to gain revenue without interacting with cryptocurrencies. Because funds are provided in U.S. dollars and interest is paid in U.S. dollars, users will only interact with U.S. dollars in their bank accounts.

Aave Arc and Compound Treasury seem to be in direct competition, but the two are likely to coexist because they provide different functions and cater to different customers. Aave Arc may be more attractive to cryptocurrency-savvy institutions that don’t mind directly interacting with the protocol’s smart contracts, seeking variable deposit APY, and/or wishing to explore decentralized lending. In contrast, Compound Treasury may be more attractive to non-crypto financial institutions seeking a fixed rate of return.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/aave-has-launched-a-licensed-defi-platform-for-institutions/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-01-06 07:59
Next 2022-01-06 08:10

Related articles