Aave V4 Aims to Bring the $12.6 Trillion Securities Financing Market On-Chain

Author: Stani Kulechov

Compiled by Deep潮 TechFlow

DeepChaohao Summary: Securities financing is one of Wall Street’s largest yet least-known markets, with the U.S. repurchase market alone exposing daily positions of $12.6 trillion. Aave V4’s hub-and-spoke architecture is perfectly suited to meet the on-chain migration demand from this trillion-dollar market. From securities-backed lending to repurchase agreements and securities lending, each环节 is eliminating the rent-seeking of traditional intermediaries through protocol design.

Securities financing is one of the largest markets almost no one outside Wall Street pays attention to—and it’s now beginning to go on-chain. Securities-backed lending is a multi-trillion-dollar business. Just the U.S. repurchase market has daily exposure of approximately $12.6 trillion, margin lending has reached a record $1.3 trillion, and securities-backed lending in wealth management adds another $400 billion+. The standalone securities lending market has about $4.6 trillion in assets on loan and generated a record $15 billion in revenue in 2025. Today, virtually none of these activities have touched blockchain—that’s the opportunity.

The best way to get it on-chain is to get the market structure right. Between borrowers and lenders sit a host of custodians, lending agents, third-party collateral managers, prime brokers, and clearinghouses. Each layer takes fees, adds settlement delays, and obscures information. Collateral is trapped in bilateral relationships, and rehypothecation chains extend beyond visibility—when problems arise, no one can clearly understand why for days. Each layer generates work, friction, and cost.

Improving this market structure is exactly what Aave V4 is designed to do, and the on-chain infrastructure has already reached scale. The stablecoin market has surpassed $322 billion, with Aave locking in approximately $23 billion in liquidity. GHO, Aave’s native dollar, is now live, and Aave Horizon’s total deposits have exceeded $500 million, powering RWA-backed loans. The cash, liquidity, and collateral pipelines are now fully in place.

V4 divides the system into a liquidity hub and spokes. The hub is a deep liquidity pool, and the spokes are modular venues (i.e., markets) connected to it, each with its own risk parameters, asset ranges, and rules. This single design choice almost perfectly mirrors how the securities financing market seeks to be organized: shared underlying liquidity with segregated compliant venues on top.

Three processes run through it all, and together they constitute the market.

Tokenized securities deposited as collateral into a hub, with conservative, asset-specific loan-to-value ratios, allow owners to borrow GHO or stablecoins without selling. Positions remain transparent, discount rates are clearly defined, and liquidations run automatically rather than through back-office processes. Owners retain upside potential while unlocking liquidity, freeing up bank balance sheets. Just in the U.S. wealth management sector, this represents a $400 billion book that remains underserved. As real-world assets approach $16 trillion in tokenization by the 2030s, every asset becomes collateral that can be borrowed against instantly. Horizon’s institutional RWA deposits have already surpassed $500 million—demand is clear. For end users, liquidity is available within minutes, backed by tokenized assets rather than bilateral credit lines requiring days of negotiation, with transparent rates set by deep, shared pools.

This is the giant. Repurchase agreements are short-term secured cash loans, primarily collateralized by government bonds, with a daily exposure of approximately $12.6 trillion in the U.S. market alone. On-chain, repurchase agreements involve using tokenized securities as collateral to borrow stablecoin cash in low-risk centers—exactly what V4 is designed to do. Atomic settlement eliminates settlement failures, terms are programmable, and the system operates 24/7 without reliance on banking calendars, making the approximately $5 trillion opaque, non-centrally cleared bilateral repo market transparent and continuously margined. The markets most in need of clean settlement and real-time collateral visibility are precisely the ones V4 serves best.

Tokenized securities themselves become centrally lendable assets. Borrowing demand from short sellers and settlement cover providers pays interest, which flows directly back to the asset owners, with lending agency functions for matching, pricing, and collateral management collapsed into the protocol. This is where the fee pool resides—generating $15 billion in revenue in 2025, corresponding to tens of trillions in lendable supply. Today, lending agents capture roughly 20% to 30% of this income, siphoning off billions of dollars annually before owners see a cent. Routing the same process through the protocol compresses this cut to near zero, with the spread instead flowing directly to owners.

There are two layout options, both sharing the same spokes. They differ only in how the underlying liquidity is organized.

Option A: Single Shared Liquidity Hub

A single liquidity center serves as the core for settlement and collateral. It holds the cash side, maintains unified accounting for each position, prices collateral via oracles, and concentrates maximum depth in one location, shared by all upper-layer components.

Surrounding it are dedicated spokes, each operating under its own rulebook but sharing the same underlying liquidity. The SBL spoke accepts tokenized securities as collateral, enabling owners to withdraw stablecoins or GHO based on conservative asset-class discount rates. SBL spokes can be subdivided into multiple spokes based on risk. The repo spoke facilitates short-term cash lending backed by high-quality securities, with atomic settlement and continuous margining. The securities lending spoke lists tokenized securities as lendable assets, with borrowing fees flowing to the owners who supply them.

The advantage of this layout is depth, as a single pool means the greatest liquidity and simplest accounting. The limitation is that risk is concentrated in one place, so isolation must be designed at the spoke level rather than structurally.

Option B: Multiple centers categorized by asset class and risk

Another approach is to operate multiple liquidity hubs, each limited to a specific asset class and risk tier, allowing spokes to connect simultaneously to multiple hubs. A low-risk government bond hub applies a tight haircut, where most repurchases naturally settle; a medium-risk credit and money market hub serves other needs; and a higher-risk equity hub applies a wider haircut and stricter liquidation thresholds. Each hub prices its own risk and isolates it.

Spokes automatically route across these hubs. The repo spoke sends Treasury collateral to the Treasury hub, and the SBL spoke sends equity baskets to the equity hub; the same user sees one interface, while the protocol places each position into a pool matched by parameters.

This brings three benefits. Risk isolation becomes structural rather than configurational, so equity shocks can be contained without affecting the treasury pool backing repurchases. Pricing becomes more precise, as each hub sets interest rates and discount rates for a single risk tier rather than mixing multiple ones. Regulatory separation is easier, since a hub can be confined to a single regulatory regime while spokes aggregate experiences across all regimes. The trade-off is that each hub has shallower depth, but total liquidity and composability are preserved because spokes draw from multiple hubs. Credit lines between hubs and specific spokes can increase liquidity flow while maintaining capped exposure to risk isolation.

The actual path is a spectrum, not a binary choice. Start with a unified approach to achieve depth and simplicity, then evolve toward categorization and risk-based segmentation as the range of collateral types expands and isolation becomes fragmented. Either way, the same spokes can continue to apply.

Roles in Both Modes

Companies previously scattered across various layers have become parameters and participants. Lending agents have become risk managers for adjustment hubs and spoke parameters; third-party collateral managers have become the accounting and clearing engine of the hub (the protocol itself); prime brokers and clearinghouses have become operators of licensed venues; and the ledgers of custodians have become the chain itself.

Functions previously held by different companies have been transitioned into protocol roles, so work is retained while rent disappears. Collateral, once trapped in bilateral agreements, is now actively employed, as the same asset can provide exposure support to every eligible center, eliminating pre-funded inventories sitting idle with each counterparty and preventing float-related revenue leakage. Licensed spoke or jurisdictionally constrained centers enforce KYC, jurisdictional, and eligible asset rules at the edge, while still drawing from shared liquidity—ensuring regulators have compliant venues without fragmenting the order books that the rest of the market relies on.

Settlement occurs at a completely different pace. In traditional securities markets, settlement still takes one day after trading in the U.S. and two days in most of Europe—a recent industry shift toward one-day settlement itself cost participants approximately $30 billion to implement. V4’s atomic settlement happens 24/7, with zero failures and marginal costs approaching zero, transforming what used to take days of reconciliation in traditional finance into a single on-chain state lookup.

For asset owners, borrowers, and cash lenders, yields are tangible. The accessible market size reaches trillions: U.S. repurchase agreements have daily exposure of approximately $12.6 trillion, margin lending stands at $1.3 trillion, and securities lending outstanding totals $4.6 trillion—all built upon collateral that will be tokenized to the tune of $16 trillion by 2030.

Earnings are retained rather than extracted, as the 20% to 30% of securities lending revenue previously taken by agents now flows back to asset owners. Settlements no longer fail, as atomic, 24/7 delivery-versus-payment replaces T+1 and T+2 cycles and intraday failures that plagued bilateral repos. Capital works harder, as pooled central liquidity eliminates idle pre-funded inventories, enabling the same collateral to flow across venues. Risk becomes visible and controllable, with positions, haircuts, and rehypothecation transparent in real time, and category centers containing shocks at their source. Access takes just minutes, so owners can instantly borrow against their tokenized positions on demand—with rates transparent and set by the market, not through days-long negotiations over bilateral credit lines.

Securities financing has long awaited a settlement and collateral layer that operates without layers of intermediaries. Securities collateral lending, repurchase agreements, and securities lending are three sides of the same balance sheet—you pledge assets to borrow cash, secure short-term financing, or lend them out to earn yield. Together, they move trillions of dollars through a pipeline that drains tens of billions and takes days to settle.

V4 now supports all three on a single architecture—whether a single-depth center or a grid of centers categorized and risk-tiered across spoke routes—liquidity, stablecoin cash ends, and institutional pipelines are now live. The pipelines have finally been upgraded, directing value to those who hold assets, with markets dependent on it totaling trillions. This is the market Aave can capture.