Aave proposes an off-chain institutional lending business

What happened

Aave Labs submitted an ARFC seeking authority for Aave Institutional, an off-chain lending business making dollar-stablecoin loans against BTC and ETH held with qualified custodians.

What changed

The proposal would add a 25 million GHO facilitator bucket and permit DAO assets to be pledged to obtain up to $25 million of USDC or USDT, exposing the DAO to bilateral loan, custodian, trading-desk, legal-enforcement, and off-chain operational risk.

What did not change

The business has not been approved or funded. No existing on-chain Aave reserve parameters changed through the forum post.

Confirmed

• The proposed loans are described as over-collateralized, typically at 60% to 75% LTV.
• Each funding authorization would require approval from the GHO Stewards.
• The proposal identifies a prospective $20 million lead facility against BTC and approximately $300 million of indicated demand.

Still open

• Final legal entities, agreements, borrower terms, custodian protections, default waterfall, valuation controls, reporting, and recovery mechanics.
• Whether governance will approve either funding source and on what limits.
• How losses, liquidity calls, or enforcement delays would affect GHO and the DAO balance sheet.

What it means for an advisor

• Require review of the Aave memo before treating approval or execution as routine treasury activity.
• Assess whether existing Aave exposure limits account for off-chain borrower, custodian, legal, and stablecoin-conversion risk.
• Track the formal vote, executable payload, contracts, and first funded facility separately.