---
title: "LlamaRisk Proposes Freezing $1.33B in Assets to Refocus Aave V3 Core on Blue-Chip Collateral"
description: "A governance proposal targets $1.03 billion in debt across rsETH, osETH, LBTC, and tBTC to strip restaking, bridge, and derivative risks ahead of Aave V4."
url: https://basisdesk.news/news/aave-v3-core-llamarisk-proposal-freeze-collateral
published: 2026-11-11T19:11:47.612Z
modified: 2026-11-11T19:11:47.612Z
section: DeFi
author: Basis Desk Newsroom (AI-generated, source-verified)
sentiment: neutral
tickers: [AAVE, WETH, LBTC, LDO, USDC, USDT]
tags: [aave, llamarisk, governance, lending, risk-management, restaking]
license: Quote with attribution to Basis Desk (basisdesk.news). Not financial advice.
---

# LlamaRisk Proposes Freezing $1.33B in Assets to Refocus Aave V3 Core on Blue-Chip Collateral

A governance proposal targets $1.03 billion in debt across rsETH, osETH, LBTC, and tBTC to strip restaking, bridge, and derivative risks ahead of Aave V4.

## At a glance

- **What happened:** LlamaRisk submitted an ARFC proposal to freeze Aave V3 Core reserves holding $1.33 billion in collateral and $1.03 billion in debt as of Nov. 9, 2026.
- **Why it matters:** The change removes restaking and bridge-dependent collateral from V3 Core's pooled liquidity, restricting future multi-asset credit risk to blue chips.
- **Who is affected:** Borrowers and issuers of rsETH, osETH, LBTC, tBTC, rETH, and other deprecated reserves on Aave V3 Core.
- **What's next:** Discussion on the governance forum followed by potential execution votes and voluntary migration talks with issuers.
- **Status:** proposed
- **Primary source:** [[ARFC] Repositioning Aave V3 Core Around Established & Liquid Collateral](https://governance.aave.com/t/arfc-repositioning-aave-v3-core-around-established-liquid-collateral/26191) — governance.aave.com

## Key points

- LlamaRisk proposed an ARFC targeting reserves that held $1.33B in collateral and $1.03B in debt as of Nov. 9, 2026.
- The plan immediately freezes reserves including rsETH, osETH, LBTC, tBTC, and rETH, setting their LTVs to zero.
- Higher-risk and bridge-reliant collateral will be phased out of V3 Core and redirected toward isolated spokes in Aave V4.

## Editorial remark

- **Context:** The proposal continues an ongoing wind-down of lower-exposure instances and oracle feeds following previous DAO measures that retired 71 reserves across 11 deployments.
- **Impact:** Borrowers holding $1.03 billion in debt across affected assets cannot expand their positions or open new credit lines, while frozen markets with over $20,000 in debt divert 99% of interest to the DAO.
- **Watch:** Community discussion on the ARFC and potential Risk Steward or Direct-to-AIP votes executing the parameter freezes.

Risk management firm LlamaRisk proposed an Aave Request for Comment (ARFC) to reposition Aave V3 Core as a market dedicated exclusively to liquid, blue-chip collateral, according to the proposal [1]. As of Nov. 9, 2026, the reserves identified for deprecation held $1.33 billion in collateral supporting $1.03 billion in outstanding debt [1]. The initial proposal measure freezes each affected reserve, immediately halting new supply, preventing new borrowing against the collateral, and setting the loan-to-value ratio to zero across all associated E-Modes while leaving existing loans untouched [1].

The scope centers heavily on leveraged staking and non-custodial bridge collateral [1]. As of Nov. 9, 2026, Kelp DAO's $rsETH and StakeWise's $osETH together account for $862 million of the debt, borrowed almost entirely as $WETH through correlated E-Mode looping strategies [1]. Bitcoin wrappers $LBTC and $tBTC, alongside liquid staking token $rETH, account for another $160 million in predominantly stablecoin debt [1]. Smaller exposures targeted for complete deprecation include $eBTC, BTC.b, tETH, PT-srUSDe-22OCT2026, and $LDO [1]. Under the plan, frozen reserves that still maintain more than $20,000 in active debt will see their reserve factor raised to 99%, directing incoming interest payments to the DAO treasury rather than suppliers [1].

## Shifting Complex Risk to Aave V4

LlamaRisk explained that Aave V3 Core's pooled liquidity model forces suppliers of $WETH and stablecoins to underwrite external operational risks without receiving extra yield, while leveraged looping borrowers capture the spread [1]. Core will purge exposure to restaking setups, leveraged wrappers, derivatives-backed strategies, and custom non-custodial bridges relying on purpose-built signers or enclave networks [1]. Instead, Aave V3 Core will retain primary assets like WETH, WBTC, cbBTC, wstETH, weETH, cbETH, native CDP and reserve-backed stablecoins such as $USDC, $USDT, GHO, and DAI, alongside tokenized gold, $AAVE, and $LINK [1]. Yield-bearing stablecoins such as USDe, sUSDe, and syrupUSDT will also remain on Core [1].

According to the proposal, assets with complex dependencies will migrate to Aave V4 [1]. Aave V4 separates liquidity across hubs and spokes, utilizing collateral add and draw caps alongside a specific risk premium parameter that directly prices the risk of underlying assets into the borrowing rate [1]. Following the proposed freeze, LlamaRisk plans to coordinate voluntary, orderly unwinds with token issuers and major borrowers before considering follow-up controls such as stepwise liquidation threshold reductions or borrow rate hikes [1].

## Sources

1. [[ARFC] Repositioning Aave V3 Core Around Established & Liquid Collateral](https://governance.aave.com/t/arfc-repositioning-aave-v3-core-around-established-liquid-collateral/26191) — governance.aave.com, 2026-11-10

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Basis Desk Newsroom · AI-generated, source-verified · https://basisdesk.news/about/how-we-use-ai