Babylon and Aave Enable Native Bitcoin (BTC) as Collateral in Aave V4

COINOTAG News reports that Babylon has forged a strategic alliance with the decentralized lending protocol Aave to enable native Bitcoin as collateral in Aave V4, eliminating the need for wrapped BTC or custody intermediaries. The collaboration fuses Babylon’s trustless vault with Aave’s centaur architecture, allowing users to deposit BTC on the Bitcoin base layer and borrow stablecoins across the Aave market. This approach preserves Bitcoin’s on-chain settlement guarantees while expanding DeFi lending access and reducing counterparty risk for BTC holders seeking liquidity.

Testing is expected to commence in early 2026, with a targeted April 2026 launch. The phased rollout is designed to broaden BTC-denominated liquidity by offering native BTC collateral without wrapping or custody, underpinned by rigorous risk controls and auditing. Market participants should anticipate forthcoming disclosures detailing eligibility, user flows, and security assurances as the collaboration advances toward mainnet deployment.