Aave V4 Launches on Arc's USDC and EURC Lending Markets

Aave V4 has gone live on Circle's public Layer 1 blockchain Arc. Initial markets include USDC, EURC, cirBTC, and WETH as supplied assets. Aave Labs announced the activation of Aave V4 deployment on Arc on September 16, following the Protocol Security Committee lifting a temporary halt during deployment. The service is accessible via Aave Pro.

The deployment implements Aave V4's core 'hub and spoke' structure, where a single Core Hub holds common liquidity while Main Spoke and Forex Spoke handle lending functions according to purpose. Main Spoke supports borrowing USDC, EURC, cirBTC, and WETH against collateral of USDC, cirBTC, and WETH. Forex Spoke focuses on cross-currency stablecoin lending centered around USDC and EURC.

LlamaRisk, which drafted Aave governance data, noted that Forex Spoke's euro-linked asset liquidity may be limited, prompting conservative limits. Initial markets were designed to expand supported assets while capping operational limits per asset. Arc is Circle's public Layer 1 blockchain built for financial markets, real-time fund movement, and institutional ecosystem participation. Network fees are structured to be paid in USDC, with USDC, EURC, and tokenized assets as primary offerings.

Circle reported over 100 applications and 100+ institutional ecosystem participants joined Arc's mainnet launch on September 16. Aave V4 deployment adds lending functionality to this stablecoin and financial infrastructure-focused network. Initial risk management settings are conservative, with LlamaRisk citing insufficient on-chain liquidity formation for asset-specific Add Cap and Draw Cap limits.

For Main Spoke in Core Hub, USDC has an Add Cap of 56 million and Draw Cap of 51 million. cirBTC has Add Cap 1,100 and Draw Cap 220; WETH has Add Cap 24,000 and Draw Cap 4,800. cirBTC is a new asset added to Aave markets in this deployment. USDC, EURC, and WETH were previously listed on other Aave instances, with collateral and borrowing availability varying by Spoke.

WETH on Arc is not native but issued via Circle's CCTPx bridge based on Ethereum deposits. Thus Arc's WETH liquidity depends on both bridge operations and Ethereum escrow holdings. LlamaRisk noted that WETH and some TokenManager contracts reference Cross Chain Token Service implementation at call time, with no on-chain timelock applied to sensitive contract upgrades—a separate risk factor.

WETH bridging has a per-transaction limit of 500 WETH and a 6-hour net flow cap of 2,500 WETH. This operational limit affects Arc's WETH supply growth rate. Prior to mainnet launch, Arc had expanded trading and liquidity infrastructure, with daily USDC transfers exceeding $300 million before the mainnet launch—though this activity did not reflect Aave V4 market liquidity.