Aave to debut institutional DeFi lending via Aave Pro

Leading DeFi lending platform Aave is set to launch Aave Pro later this month.

The protocol will use private pools to provide institutional investors with direct access to decentralised markets. These pools will be separate from existing liquidity pools on Aave.

Aave is a decentralised lending platform that allows users to borrow, lend and earn interest on cryptocurrencies without the requirement of a third party. The protocol runs primarily on the Ethereum blockchain, with their recent integrations of the Polygon network proving successful.

Aave currently secures close to $18bn in assets across its platform.

Aave announced the “Next Steps in Institutional DeFi” during a webinar which featured CEO Stani Kulechov, Fireblocks CEO and co-founder Michael Shaulov, and Galaxy Digital CEO Mike Novogratz.

Following an email sent out to attendees, Aave said the protocol was being launched due to “extensive demand from various institutions”. The protocol itself will “enable institutions and corporates to access DeFi yields and benefit from the transparency and automation of decentralised finance”. 

For KYC processes required to use Aave Pro, Aave has partnered with digital asset custody firm Fireblocks to onboard new clients. Aave Pro will require stringent Know Your Customer (KYC) completion due to the strict regulations that apply when offering products to institutions. Fireblocks will also “implement AML compliance and antifraud controls” for Aave Pro.

According to the email, Aave Pro will support four assets – Bitcoin, Ether, Aave and USDC – as institutional demand and ownership is concentrated into these assets. Additionally, Aave will add a “whitelisting layer” onto its existing V2 smart contracts to ensure that only KYC-compliant “institutions, corporates and fintechs” have access to the platform. 

Aave also confirmed Aave Pro will be “decentralised and governed by the Aave governance”.

Kulechov tweeted that the point about governance is the “most interesting” – something which could hint at upcoming improvements or changes to currency governance operations.

The pool was first revealed back in May by Kulechov and prompted increased interest in the capabilities of Aave alongside excitement and anticipation of the coveted “institutional interest” that the industry seeks.

The announcement from Aave led to a 30% price rally from $265 to a recent monthly high of $345. The $330 price level was last reached on June 14, which marked a market-wide pullback in the price of leading DeFi assets. 

Aave has had a generally strong July following the pullback, starting the month at around $250 and seemingly trending upward before the Aave Pro announcement. The price increase also coincided with a 140% uplift in trading volume, which could indicate the announcement sparked a strong reaction from both retail and institutional investors.