Babylon wants Aave users to borrow against Bitcoin

Babylon Labs has submitted a new governance proposal on October 14, 2026, to allow Bitcoin holders to borrow stablecoins through Aave V4 without selling their BTC, moving their coins to another blockchain, or handing them to a custodian. Babylon Labs published the proposal on Aave’s governance forum, advancing an integration first discussed in May. The plan would introduce two dedicated components for Bitcoin backed borrowing and loan liquidations. The integration still requires community approval, finalized lending risk settings, and further security checks before launch. The proposal introduces Babylon’s Trustless Bitcoin Vaults technology to Aave V4, the latest version of the decentralized lending protocol. Under the proposed system, Bitcoin holders would deposit BTC into special vaults operating directly on the Bitcoin blockchain.

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