Babylon’s Bitcoin Proposal Puts Aave Exit Controls in Focus

Babylon Labs’ proposal to let Aave V4 accept native Bitcoin (BTC) as collateral would give two multisigs immediate power to pause vaults, potentially stopping withdrawals while deposited BTC remains locked and backs Aave debt. Babylon Labs posted its Request for Comment on Oct. 14, opening the plan to Aave community review . The design would add two Aave V4 Spokes: one for borrowing against native BTC and a second for liquidation settlement. The proposal remains in governance review, with community feedback and risk analysis ahead of a possible Snapshot vote. Depositors would lock BTC in a Taproot output on the Bitcoin network. Because Aave V4 accepts ERC-20 collateral, an internal token with eight decimals would record each position.

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