We’re excited to announce that Aave Arc, the new permissioned DeFi liquidity pool for financial institutions, is now live with Fireblocks as the very first active whitelister for the protocol. Aave Arc is a DeFi liquidity market designed to be compliant with AML regulations, with all participating institutions required to undergo Know Your Customer (KYC) verification.
Providing a separate deployment of the Aave V2 liquidity pool for institutional players, the protocol enables whitelisted institutions to securely participate in DeFi as liquidity suppliers and borrowers. Now, Fireblocks users who volunteer to become whitelisted by undergoing a KYC process can access Aave while benefiting from Fireblocks’ industry-leading security.
Permissioned DeFi is the future of institutional finance
While approximately $255.9 billion is currently locked in DeFi, the market has largely remained untapped by institutions due to a lack of support for enterprise-grade risk management and KYC/AML requirements.
According to blockchain research firm Blockdata, enabling institutional access to DeFi could unlock a trillion-dollar opportunity over the next half decade. Aave Arc looks to usher in this paradigm shift by unlocking secure and compliant DeFi access for financial institutions across the globe.
In general, permissioned protocols like Aave Arc can offer the decentralization benefits of DeFi, while allowing only permissioning (whitelisting) to be more centralized for KYC/AML purposes.
DeFi represents a powerful wave of financial innovation including transparency, liquidity, and programmability–and it’s been inaccessible to traditional financial institutions for far too long. The launch of Aave Arc allows these institutions to participate in DeFi in a compliant way for the very first time.Stani Kulechov Founder and CEO
Supporting permissioned DeFi on Aave Arc as a whitelister
As Aave Arc’s first active whitelister, Fireblocks has developed a framework for whitelisting institutions that references globally accepted KYC/CDD/EDD principles, in accordance with FATF guidelines.
With this framework, Fireblocks is able to verify the identity and beneficial ownership of legal entity customers, as well as monitor the Aave Arc pool and its participants on an ongoing basis. At launch, Fireblocks has approved 30 licensed financial institutions to participate on Aave Arc as suppliers, borrowers, and liquidators. Among the institutions are Anubi Digital, Bluefire Capital (acquired by Galaxy Digital), Canvas Digital, Celsius, CoinShares, GSR, Hidden Road, Ribbit Capital, and Wintermute.
Fireblocks’ approach has been approved by Aave protocol governance and all future whitelister institutions, if approved by Aave protocol governance, will have to meet or exceed these standards.
How to access Aave Arc with Fireblocks
With Fireblocks, getting onboarded onto Aave Arc is an easy process:
- Apply for access on this page
- Undergo KYC with Fireblocks to become a whitelisted supplier, borrower, and/or liquidator on Aave Arc. You must be a Fireblocks user to join as a supplier or borrower.
- Access Aave Arc through Fireblocks’ DeFi gateways
Aave Arc is another market on Aave which users can access through their web3 app as soon as they are whitelisted—it’s that easy.
1. What is a “whitelister”?
Whitelisters are regulated custodians and financial institutions that are approved to KYC and whitelist their customers to participate in the KYC’d DeFi protocol’s marketplace.
2. Are any other institutions approved to participate in Aave Arc’s liquidity market besides Fireblocks users?
Fireblocks is the first trusted, regulated entity that is a whitelister approved to KYC customers for Aave Arc. Other regulated entities will be added in the future that will also be able to whitelist customers for the market.
3. Does Aave also whitelist institutions into the market?
Aave can recommend institutions to trusted regulated entities (such as Fireblocks), which are the only ones who can KYC and whitelist the recommended institutions. Aave does not whitelist or approve the institutions.
4. Is the functionality any different for Aave Arc compared to standard Aave?
The experience and app UI is generally the same. The main difference is that you are interacting with whitelisted suppliers and borrowers, and there is a smaller subset of tokens (WBTC, ETH, USDC, and AAVE).
What are the roles approved institutions can have on Aave Arc?
- Suppliers – Earn interest for providing liquidity to the marketplace.
- Borrowers – Put up collateral in order to borrow from the liquidity market.
- Liquidators – If a borrower isn’t meeting their terms, liquidators enforce “good behavior” by buying a portion of the debt at a pre-decided discount. They find out via API or smart contract who is not meeting their loan terms.
As the first and only active whitelister for Aave Arc, Fireblocks is breaking down barriers for institutions who want to enter the DeFi space, but are held back by regulatory constraints. If you’re ready to tap into the DeFi market, sign up for Fireblocks Permissioned DeFi here.