Aave V4 Brings Dollar-Euro Lending to Circle's Arc Blockchain
Aave V4 Launches Dollar-Euro Markets on Arc
Aave V4 launched on Circle's Arc blockchain on September 16, offering two lending markets that share a single liquidity pool. The deployment supports USDC, EURC, wrapped Ether (WETH), and Circle's wrapped Bitcoin (cirBTC).
The new setup gives holders of EURC, a euro-backed stablecoin, a way to borrow USDC without selling their euro tokens. That option was not available in Arc's Main market, which does not accept EURC as collateral.
How the Two Markets Work Together
In Aave V4, each borrowing market operates as a separate module that sends deposits to and draws loans from a shared central pool called the Core Hub. This is different from Aave V3, where each market needed its own independent deposit base.
Both Arc markets draw from the same Core Hub, but they have different rules for what collateral is accepted. The Main market accepts USDC, WETH, and cirBTC. The Forex market is limited to USDC and EURC, and allows users to borrow one stablecoin by posting the other as collateral.
Separate supply-only modules also exist, converting deposits into tokenized positions that external vaults and aggregators can use without enabling borrowing through those integrations.
Launch Limits and Safety Caps
The launch configuration set borrowing and supply limits for each asset, based on recommendations from risk firm LlamaRisk. For the Main market, initial limits were 56 million USDC supplied and 51 million borrowed; 20 million EURC supplied and 18 million borrowed; 1,100 cirBTC supplied and 220 borrowed; and 24,000 WETH supplied and 4,800 borrowed.
The Forex market received more conservative limits: 13 million USDC supplied and 11 million borrowed, plus 10 million EURC supplied and 9 million borrowed. LlamaRisk cited limited secondary-market liquidity for EURC as the reason for the lower caps.
These figures represent launch limits, not current capacity readings.
Deposits Cross $300 Million
Aave announced on October 12 that its Arc deployment had surpassed $300 million in deposits. Arc featured the markets in a walkthrough on October 15 with Kolten of Aave. Onchain logs showed the Core Hub processing supplies and borrowing through the Main market on October 15.
Risk and Network Controls
In a prelaunch technical assessment, Aave Labs noted that USDC is Arc's gas asset, meaning it is used to pay transaction fees on the network. The assessment also found that an issuer freeze can stop an address from transacting entirely. However, tests showed that a frozen borrower's position could still be repaid or liquidated by a third party.
Ethereum's V4 deployment also uses shared hub liquidity and includes a Forex Spoke listed in Aave's contract directory.
Why This Matters for DeFi Borrowers
The Arc deployment expands how stablecoin borrowers can interact across currencies. EURC holders, who previously could not use their tokens as collateral on Arc's Main market, now have a dedicated pathway to borrow USDC. The shared liquidity model also means both markets benefit from a combined deposit base rather than operating in isolation.
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