Horizon, an Initiative by Aave Labs, Proposed a New Financial Product

Horizon, an initiative by Aave Labs, proposed a new financial product to bring real-world assets (RWAs) into decentralized finance (DeFi) under a regulatory framework.

A new initiative called Horizon is proposing a financial product that would bring real-world assets (RWAs) into decentralized finance (DeFi) in a fully compliant manner.

The initiative, which would be a licensed instance of the Aave Protocol, is expected to generate new revenue streams for the Aave DAO, accelerate GHO adoption, and strengthen Aave’s role as a key player in the growing tokenized asset space.

The proposal, which is now being considered by the Aave DAO, aims to integrate institutions into a regulated but permissionless environment, enabling them to use tokenized money market funds (MMFs) as collateral to borrow stablecoins like USDC and Aave’s GHO.

This move would unlock liquidity for stablecoins and expand institutional access to DeFi, making it more accessible to regulated financial entities while benefiting the Aave ecosystem.

Institutions To Access Regulated But Permissionless Stablecoin Liquidity

The interest comes amid accelerating institutional adoption. As reported by BeInCrypto, institutions are increasingly showing interest in crypto, especially in the wake of the latest Bitcoin ETF filings by major players like BlackRock (NASDAQ:BLK) and Franklin Templeton.

This interest is also being driven by the potential of blockchain technology to enhance liquidity, reduce costs, and enable programmable transactions.

Moreover, tokenization on blockchain has made traditional assets more accessible on-chain, with tokenized US Treasuries growing by 408% year-over-year to reach $4 billion, according to the initiative's proposal.

Subject to approval by the Aave DAO, Horizon’s RWA product will initially launch as a licensed instance of Aave V3. Later, it would transition to a custom deployment of Aave V4 when it becomes available.

According to the proposal, Horizon has proposed a structured profit-sharing mechanism to ensure long-term alignment with the Aave DAO.

"This structure includes a 50% revenue share to Aave DAO in Year 1, alongside strategic incentives to drive ecosystem growth," the proposal, which was shared with BeInCrypto, adds.

Additionally, if Horizon launches its token, 15% of its supply will be allocated to the Aave DAO treasury and ecosystem incentives. A portion will also be set aside for staked AAVE holders.

The proposal comes as the rise of RWAs is transforming the financial playing field, and institutions are taking note. Tokenized assets are emerging as a bridge between traditional finance (TradFi) and DeFi, providing investors new opportunities to access yield-bearing assets. Key players include BlackRock (BUILD), Franklin Templeton, and Grayscale.

However, DeFi’s open and permissionless nature poses regulatory challenges. It lacks the compliance frameworks required for large-scale institutional participation.

This limits the potential for institutions to contribute to the DeFi ecosystem despite the demand for yield and liquidity management in the decentralized space.

As such, institutional adoption remains limited without tailored solutions, and integrating RWAs into DeFi at scale presents a significant challenge.

Horizon seeks to bridge this gap by allowing institutions to access permissioned stablecoin liquidity. It will also meet the compliance and risk management requirements of asset issuers.

Tokenized asset issuers can enforce transfer restrictions and maintain asset-level controls. According to the announcement, this would ensure only qualified users can borrow USDC and GHO.

“A separate GHO Facilitator will enable GHO minting with RWA collateral, offering predictable borrowing rates optimized for institutions. This enhances security, scalability, and institutional adoption of RWAs in DeFi,” the proposal adds.

The proposed product builds on the institutional framework established by Aave Arc. To ensure a smooth integration, Horizon will implement a permissioned token supply. It will also feature withdrawal mechanisms, stablecoin borrowing for qualified users, and permissioned liquidation workflows.

The initiative is expected to enhance the security, scalability, and institutional