aave zero ltv: USDT, USDC Still Barred as Collateral
The aave zero ltv list keeps nine assets, including USDT and USDC, from backing new loans even after Aave reopened V3 and V4 markets frozen over the Binance exploit.
Early story. Some claims here are not officially confirmed yet. We update this post as it confirms.
- The nine restricted assets are USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUT, PAXG and OP, including wrapped and bridged versions.
- Risk provider LlamaRisk says emergency cap cuts removed about $3.7 billion of unused borrowing capacity on V3 and $130 million on V4.
- Aave says its smart contracts were unaffected and user positions stayed fully collateralized.
in this block
The aave zero ltv list is the part of the Binance fallout that DeFi borrowers need to read closely. Aave has reopened deposits and borrowing across its V3 and V4 markets after an emergency freeze triggered by the Binance hot-wallet exploit, but nine assets, including USDT and USDC, still carry a 0% loan-to-value and cannot back new loans, TokenPost reported on October 30.
What actually happened
When the Binance breach hit on October 29, Aave froze affected markets as a precaution. During the freeze, new supply and new borrowing were blocked, while withdrawals, repayments and liquidations kept working, CryptoSlate reported. According to LlamaRisk's post on the Aave governance forum, one wallet in the exploiter's cluster supplied 60 million USDT on Aave V3 Ethereum Core and borrowed 19,762 WETH, worth about $44.6 million, roughly 40 minutes before the first freeze at 21:42 UTC. LlamaRisk described that position as overcollateralized and subject to normal liquidation, and said it did not put suppliers at risk.
On October 30, Aave lifted the broad pause. Deposits and borrowing resumed in every V3 and V4 market, according to TokenPost. The catch is the asset-level rule: the nine listed tokens can still be supplied, withdrawn, borrowed and repaid, but they add no borrowing power for new loans.
How the aave zero ltv rule works
On Aave V3, the zero loan-to-value setting also applies in E-Mode, and liquidation thresholds stay unchanged, so existing health factors do not move just because of the change. On V4, the equivalent restriction is a zero collateral factor. CryptoSlate explains that on V4, taking a new borrow, withdrawing collateral or toggling collateral moves an existing position onto the zero-factor configuration.
In practice, that means borrowers who post USDC or USDT as collateral cannot open fresh debt against it for now. Existing V3 positions are not forced into liquidation by the change alone, but anyone planning to adjust a V4 position should check how the new settings apply first.
Markets are open again. Using stablecoins as collateral for new loans is not, at least for now.
The caps and rates behind the reopening
LlamaRisk also cut borrowing ceilings. Its method starts with the larger of pre-exploit borrowing or current borrowing, then adds about 2%. For example, the USDT cap was set at 2,560 million against 2,504.7 million borrowed before the exploit, and the USDC cap at 2,270 million against 2,215.9 million, per CryptoSlate. Queued GHO changes would cut the Core market ceiling from 150 million to 105 million and Prime from 85 million to 35 million.
Liquidity is the other constraint. At 00:26 UTC on October 30, LlamaRisk put Core USDC utilization at 97.8%, with several reserves at 100%. Suppliers can only withdraw unborrowed cash, so a fully used pool can delay exits until borrowers repay or new deposits arrive. LlamaRisk also temporarily lowered the steep part of the interest-rate curve on the largest stablecoin reserves so that the borrow rate at full utilization does not exceed 10% APR, easing pressure on borrowers.
Why it matters
Aave is one of the largest lending protocols in DeFi, and its response shows how a centralized exchange hack can ripple into on-chain markets even when the protocol itself is not breached. LlamaRisk's governance post gives the reason for the aave zero ltv list directly: these are the assets held across the exploiter's address cluster. Since the attacker could swap stolen funds into any listed token, Aave chose to stop exactly those assets from creating new borrowing power.
LlamaRisk said it will evaluate the conditions for restoring LTV on the restricted assets and share them in the governance thread. No date has been given. For the wider story, see binance 6.3b hack and the exchange's restart plan in binance withdrawals sunday.
What to do as a reader
If you borrow on Aave, check your health factor and which of your collateral assets are on the restricted list before making changes, especially on V4.
Read the Aave governance thread for official updates on caps, rates and when the nine assets regain borrowing power.
Expect withdrawals from highly utilized pools to take longer than usual. Nothing here is investment advice.
Not financial advice. DYOR, ser.
