Aave, one of the largest decentralized lending platforms, has recently launched its permissioned lending and liquidity service called Aave Arc. This has been said to help most institutions participate in decentralized finance which complies with the regulations imposed on them.
This comes as an opposition to the permissionless cross-chain counterparts on the platform, which would also see the service strictly as a permissioned liquidity pool that was specifically designed for most of the institutions to maintain regulatory compliance in the space of decentralized finance.
Aave Arc Plans On Bringing Institutions To the DeFi Space
The first of the 30 entities that have been lined up for the whitelist for Aave Arc has been Fireblocks which is the digital asset custodian for the institutions. It was explained in a 5th January announcement that the pool would enable most of the whitelisted institutions to securely participate in decentralized finance as most of the borrowers and suppliers of liquidity.
Users of the permissioned lending pool must perform their due diligence procedures which involve knowing your customer/anti-money laundering KYC in order to gain access to the protocol.
It has been reported that Fireblocks would also serve as a whitelisting agent for Aave Arc, which would further ensure that most of the other institutions that want to join the permission pool would have to meet the requirements for KYC.
The lending platform itself cannot perform this task since it is not a regulated entity like a bank or any other traditional financial institution. As the agent for whitelisting, Fireblocks has already gone ahead and approved around 30 licensed financial institutions.
The new permissioned liquidity pool of Aave does aim at bringing forth more institutions to the developing space of DeFi that has a total value locked at $133 billion.