Aave is establishing Circle’s Arc blockchain as the base for its upcoming generation of markets. In an interview featured by Arc, Aave’s chief business officer Luigi D’Onorio DeMeo presents a roadmap extending beyond crypto-native collateral to include tokenized equities, on-chain foreign exchange, and institutional lending.
Aave V4 is already operational on Arc, having launched on September 16 with a Core Hub and two borrowing markets, Main, and Forex, using USDC EURC wrapped Ether, and cirBTC. By October 12, Aave reported that deposits on Arc had surpassed $300 million.
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Moving from Shared Liquidity to Real-World Collateral
V4 introduces borrowing modules called spokes that send deposits to a shared hub and draw loans from it, while maintaining distinct collateral settings and limits. In contrast, V3 treated each market as a separate pool. On Arc, Main, and Forex, they borrow from the same Core Hub, more efficiently deploying liquidity. That configuration allows Aave to isolate risk to certain products without atomic liquidity in each.
Source: aave.com
For instance, a tokenized-equity market could set more conservative loan-to-value limits and liquidation rules than a crypto market, and still allow products across the market to use the same shared liquidity layer as Aave has done elsewhere with an Equities Hub on Base, which allows eligible non-US users to take loans in USDC against seven Coinbase tokenized stocks.
The opportunity is huge. As Aave, the global securities lending market has around $4.6 trillion of securities on loan per year and about $35 billion of annual revenue. Prime brokers capture between 50% and 85% of borrow fees. Onchain lending, they suggest, can be more transparent, continually priced, and without rehypothecation.
Also Read: Payward AAVE Acquisition Signals Growing Institutional Interest in DeFi
Why Arc, and Why Now
The Arc ecosystem is built on Circle’s Layer 1 blockchain, whose native gas is USDC and, which is designed for regulated finance. For Aave, the value proposition lies in distribution and enterprise readiness. It brings, stablecoin, rails, and a design that is potentially easier for banks to assess. It uses proven onchain lending rails and risk management.
Onchain FX is the inaugural use case. The Forex spoke enables users to dedicate USDC or EURC and borrow the other, resulting in a dollar-euro lending market without selling underlying stablecoins. Launch limits were prudently conservative, given relatively low secondary-market liquidity for EURC.
Also Read: Aave V4 Seamless Collateral Swaps Launch on Base 2026
What Comes Next, and What to Watch
The community must slowly build out governance and risk parameters. The addition of tokenized equities introduces issuer risk, oracle risk, trading hour discontinuities, corporate-action considerations and jurisdictional constraints. Aave’s governance forum and risk contributors like LlamaRisk will be critical in determining supply limits and asset composition.
Source: LinkedIn
The broader market will place greater importance on depth of liquidity than headline account totals. That $300m is an early shot over the bow, not an indication that tokens are here to stay and buried the hatchet. The industry will watch if brokers, market makers and vaults will connect to Aave’s supply-only tokenisation spokes, which can use deposits to fund and collateralise external protocols.
Source: Fumbi
Compliance trade-offs will be closely observed. Arc, for instance, is enabled by USDC as a gas source and offers an issuer freeze, but it also means Aave has more control over who can and cannot lend and borrow, creating centralisation issues that don’t exist on the mainnet.
Source: EQT Group
Aave Labs pointed out that an issuer freeze would make an address unable to transact entirely. Aave’s hop to Arc is a gamble that a future where regulated stablecoins, tokenized assets and shared lending come together in DeFi really will happen as DeMeo envisions. If instead it remains a playground for crypto-native user bases it won’t redefine securities lending.
Also Read: Aave V4 USDC Incentives Lower Tokenized Stock Borrowing Costs
Ananthyka J is a market reporter at Tronweekly, reporting on cryptocurrency news. She covers cryptocurrency markets, blockchain technology, and digital asset regulation, focusing on Bitcoin, Ethereum, DeFi, altcoins, and crypto policy. Her reporting emphasizes clear and accurate market coverage, including crypto market movements, regulatory developments, and blockchain adoption. She holds a BA in Journalism and Mass Communication and an MA in Communication and Media Studies. She has also completed multiple media internships, follows strict editorial and fact-checking standards, and discloses potential conflicts of interest when reporting.
