LlamaRisk Moves to Freeze Five Collateral Assets on Aave V3 Core

LlamaRisk, which handles risk for Aave, published a proposal to freeze rsETH, osETH, LBTC, tBTC and rETH on Aave V3 Core, plus a group of smaller reserves. As of Nov. 9, those assets held $1.33 billion of collateral backing $1.03 billion of debt. A freeze would halt new supply and drop loan-to-value to zero, but existing positions would stay open and could be wound down over time.

The risk shop framed the freeze as step one. Frozen reserves that can still be borrowed and carry more than $20,000 of debt would also see their reserve factor bumped to 99%. LlamaRisk said on X that the move 'curbs new exposure to the assets in scope' while letting existing positions 'unwind gradually,' and that it would work with each asset issuer and the biggest borrowers on an orderly migration.

More controls would ride along if the proposal passes: stepwise cuts to liquidation thresholds, then interest rate changes with targeted rebates as a final step — used only where positions fail to migrate in the coming months. LlamaRisk's reasoning is that V3 Core pools liquidity across every listed asset, so WETH and stablecoin suppliers underwrite each asset at the same borrow rate. It also flagged that a growing slice of that collateral leans on outside layers, from services and leveraged strategies to cross-chain bridges and custodial arrangements.

The plan splits Aave's markets by job. Core would take liquid, blue-chip collateral, while Aave V4 would carry a wider range of assets. The proposal sits at the Aave Request for Final Comment stage and has not gone to a vote.

Two forum replies already objected. A StakeWise representative said its liquid staking has run since January 2021 'with zero hacks and zero validator slashings,' and noted osETH has been Aave collateral for 2.5 years. A separate reply backed focusing Core on established, liquid collateral but asked that Rocket Pool's rETH be pulled from the list, calling it 'a plain LST backed by staked ETH and fully verifiable on-chain.'

Aave unfroze markets last month after the Binance hack. AAVE traded at $113.67 at press time, down 8% over 24 hours, according to CoinMarketCap data.