Babylon proposes native BTC as collateral on Aave V4 via Trustless Bitcoin Vaults
Babylon Labs filed an ARFC to enable native BTC as collateral on Aave V4 through its Trustless Bitcoin Vaults protocol, with stablecoin borrowing against BTC as the first use case.
Source: Aave governance forum, '[ARFC] Onboard Native BTC as Collateral to Aave V4 via Babylon Trustless Bitcoin Vaults' (Babylon Labs, Oct 14, 2026).
The integration would deploy two new Aave V4 Spokes, the Babylon Spoke and the BTC Vault Swap Spoke, with native BTC as the Babylon Spoke's sole collateral asset. In Trustless Bitcoin Vaults, a depositor locks BTC in a Taproot UTXO on Bitcoin, and redemption is governed by on-chain rules and settles directly on Bitcoin. Risk parameters will come from Aave's risk service providers.
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