Aave: the crypto lending protocol

For a treasurer the question is how to raise dollar liquidity without selling a money market fund position. Aave Horizon, launched by Aave Labs on August 26, 2025, is a lending market on Ethereum built on Aave Protocol v3.3. Qualified institutional investors post tokenized real-world assets as collateral and borrow the stablecoins GHO, RLUSD and USDC. At launch the collateral came from Superstate (USTB and USCC) and Centrifuge (JRTSY and JAAA), with Circle's USYC announced. Anyone can supply stablecoins to the market without permission and earns the interest the institutions pay.

Aave Labs calls the model "permissioned issuer, permissionless liquidity", as The Block reported when Horizon was announced: the issuers of the tokenized funds control who may hold them, while the stablecoin side stays open. An earlier product, Aave Arc, was fully permissioned. Tokenized money market funds supply the collateral. Tokenized collateral also has uses in repo and margin.

A lender deposits an asset into a pool and receives interest that rises when more of the pool is borrowed. A borrower deposits collateral worth more than the loan, so every loan is overcollateralized. Each position has a health factor; when the value of the collateral falls and the health factor drops below 1, other users can repay part of the loan and take collateral at a discount. That is the onchain version of a margin call, run by code with no notice period.

Prices come from oracles, and the rules for each asset, such as the maximum loan-to-value, are set by governance of the Aave DAO. The DeFi lending page compares Aave with other lending protocols, and the answer on blockchain oracles explains the price feeds.

Aave issues GHO, which it calls "the decentralized stablecoin native to Aave". A borrower mints GHO against collateral held in the protocol. In Horizon, GHO is one of the stablecoins institutions can borrow. Under MiCA, an issuer that offers a dollar stablecoin to EU clients needs a license as a bank or e-money institution; the e-money tokens page explains that category and the stablecoins in Europe page the market around it.

Aave is a member of the Multichain Asset Managers Association (MAMA), which works with regulators on rules for onchain asset management and is an event and network partner of Finance Loop. Lending protocols such as Aave come up whenever Finance Loop brings people from banks and asset managers together with DeFi builders, in Frankfurt, Munich, Berlin and Hamburg.

Aave is a lending protocol on Ethereum and other blockchains. Users supply crypto-assets and stablecoins to pools, borrowers take overcollateralized loans from them, and smart contracts compute interest and run liquidations. Aave Labs builds products on it, and the Aave DAO governs it.

Horizon is a market run by Aave Labs where qualified institutions borrow GHO, RLUSD or USDC against tokenized funds and other real-world assets. It went live on August 26, 2025 on Ethereum.

When the health factor drops below 1, the position can be liquidated: another user repays part of the debt and receives collateral at a discount. The borrower keeps the rest of the collateral.

MiCA excludes services provided in a fully decentralized manner. A bank or broker that offers Aave lending to its own clients is a service provider and needs its own license, and the issuers of the tokenized funds in Horizon fall under securities law.