Bitcoin holders seeking to borrow without wrapping or bridging their BTC could gain another option under a proposed Aave V4 integration with Babylon. The proposal describes locking native BTC in self-custodial vaults to borrow assets such as USDT and USDC, but the integration was not yet live at the time of the report.
Foresight News reported on November 9, 2026, at 22:37:50 (UTC+8) that, according to Babylon, Aave DAO had approved the ARFC proposal that day with 100% of votes in favor.
Proposed custody and borrowing setup
The integration would use Babylon’s Trustless Bitcoin Vaults to support native BTC as collateral on Aave V4. According to the report, holders would lock BTC in those vaults under a self-custodial arrangement, without wrapping it or moving it across chains.
The proposal specifies:
- A 78% collateral ratio for native BTC.
- A 0% risk premium.
- Liquidity primarily supplied by the Aave Core Hub.
- An initial stablecoin credit limit of approximately $21 million, increasing gradually afterward.
These are proposed borrowing parameters, not a statement that the arrangement eliminates risk.
Revenue sharing and token buybacks
After the integration launches, Aave DAO would retain the first $500,000 in revenue in each 12-month period. Revenue above that threshold would be shared with Babylon, with a portion allocated to token buybacks through a tiered structure.
The report gives two of those tiers:
| Annual revenue portion | Aave share | Babylon share | Buyback fund |
|---|---|---|---|
| $500,000–$2 million | 78% | 18% | 4% |
| Above $6 million | 61.5% | 31.5% | 7% |
Of the buyback fund, 85% would go toward AAVE buybacks and 15% toward BABY buybacks. The supplied report does not detail the allocation for the intervening revenue tier.
Approval is not launch
The proposal’s next step was the AIP stage, with mainnet launch targeted for the end of 2026. The planned rollout would proceed in phases, initially limiting both participation and scale.
For holders assessing the custody option, the key distinction in this report is between the approved ARFC proposal and an operational service: the launch date remained a target, and initial access was expected to be restricted.