Decentralised lending platform Aave announced the launch of its liquidity pool service called Aave Arc. This will pave the way for the first 30 approved financial firms to participate in decentralised finance (Defi) as liquidity borrowers, suppliers and liquidators in a more compliant manner.
In the announcement posted on the Aave’s site on January 5, founder and CEO Stani Kulechov said that the launch of Aave Arc will allow even traditional financial institutions to participate in Defi in a compliant way. This will let regulated entities get the transparency, liquidity and programmability of Defi for the first time.
Up to 30 institutions are lined up for the whitelist for Aave Arch. Fireblocks, a New York-based digital asset custodian is the first institution to become whitelisted for the Aave Arc platform. The rest of the whitelisted entities were then approved by Fireblocks since it performs Know Your Customer (KYC) and Anti Money Laundering (AML) procedures.
Fireblocks recently highlighted the growing popularity of the Defi market, making it essential for the crypto projects to have comprehensive KYC and AML regulations. It has developed a framework for approving institutions in accordance with the guidelines of the global money laundering and terrorist financing watchdog, Financial Action Task Force (FATF).
Those who will become whitelisted by Fireblocks through undergoing the KYC process can benefit both from Aave’s services and Fireblocks’ security. During the launch, the digital asset custodian firm has already approved 30 institutions that will participate in Aave Arc’s ecosystem. Among those entities are the following:
- Anubi Digital: An Italian platform where users can store their digital assets such as cryptocurrencies and Non-Fungible Tokens (NFTs) safely.
- CoinShares: A digital asset management firm that manages over $1 billion assets on behalf of a global client base.
- Celsius: A crypto yield aggregator that focuses on crypto lending and borrowing.
- GSR: A crypto market maker that specializes in liquidity, risk management and structured products in the digital assets industry.
- Hidden Road: An investment firm that focuses on short duration loans and other financing solutions.
- Ribbit Capital: A venture capital firm that globally invests in early-stage firms.
- Wintermute: A leading global digital assets marketing firm that creates efficient markets on both centralised and decentralised platforms.
Approved institutions can become suppliers, borrowers or liquidators while suppliers earn interest by providing liquidity to the marketplace. Borrowers put up collateral to borrow from the liquidity market. On the other hand, liquidators are the ones who will find out who is not meeting the loan terms among the borrowers.
Aave Arc will initially support 4 cryptos: Ethereum (ETH), Wrapped Bitcoin (WBTC), USD Coin (USDC) and Aave’s native token (AAVE). To participate in the protocol, institutions just need to apply for access and undergo Fireblock’s KYC verification.
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