On September 25 local time, decentralized-finance lending protocol Aave launched an Equities Hub on Aave V4 on the Base network. The market allows users to borrow the dollar stablecoin USDC against tokenized stocks issued by Coinbase. The seven supported assets represent shares of Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA, and Tesla.
Users can post one stock or a basket of several stocks as collateral and borrow USDC equal to 65% to 79% of the collateral's assessed value, depending on the asset. At launch, the market-wide limits were set at about $29 million in accepted collateral, $32 million in USDC deposits, and $21 million in USDC borrowing. USDC is currently the only asset available to borrow, while the stock tokens may be used only as collateral.
The tokens implement certificates issued by Coinbase Onchain SPV Ltd. The underlying shares are held for the issuer in segregated accounts by Alpaca Securities LLC, a broker-dealer registered with the U.S. Securities and Exchange Commission. The tokens are offered to eligible investors outside the United States in permitted jurisdictions.
The lending market operates on weekends, but Chainlink price feeds used to value collateral update from 8 p.m. Eastern Time on Sunday through 8 p.m. on Friday. During weekends and U.S. market holidays, when price updates are unavailable, the market uses the last reported price to value collateral.
Interest continues to accrue during those periods, increasing the amount owed, so a loan can become eligible for liquidation even when the reported collateral price does not change. When price feeds resume, a reflected decline in the share price may also cause additional loans to reach their liquidation thresholds. Aave's published risk assessment says the collateral ratios and market limits for each asset were set with these market-closure and price-volatility risks in mind.