Babylon Labs and Aave Labs have announced a strategic partnership to enable native bitcoin-backed lending through Aave V4’s innovative Hub and Spoke architecture on December 3, 2025. The collaboration introduces a dedicated bitcoin-backed Spoke that allows bitcoin to be used as direct collateral in decentralized finance markets without relying on wrapped assets or centralized custody.

The integration leverages Babylon’s Bitcoin Vault cryptographic mechanism, which locks bitcoin on the native Bitcoin network while creating verifiable collateral representations. With over $1 billion in BTC-backed loans originated in 2025 and institutional demand accelerating, this partnership aims to launch a joint product in April 2026, pending Aave governance approvals. “Trustless Bitcoin vaults allow native BTC to participate directly in DeFi while preserving its fundamental security guarantees,” says David Tse, Babylon’s Co-Founder.

Read More: Kraken Partners With Babylon to Launch BTC Staking With up to 1% APY

• When will the bitcoin lending feature launch? Product launch is targeted for April 2026.

• How does this differ from existing bitcoin lending? Native collateralization without wrapped assets or centralized custody.

• What blockchain networks are involved? Bitcoin network and Aave V4 ecosystem.

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