# Babylon’s Bitcoin Proposal Puts Aave Exit Controls in Focus By Simon Yoon Canonical URL: https://www.tokenpost.com/news/technology/34424 Published: 2026-10-18T16:13:21.000Z Updated: 2026-10-18T16:13:21.000Z Section: Technology > The design would lock BTC on Bitcoin and use a restricted internal token for Aave V4 lending. It remains in risk review, and one proposed Emergency Guardian seat is listed as TBD. Babylon Labs’ proposal to let Aave V4 accept native Bitcoin (BTC) as collateral would give two multisigs immediate power to pause vaults, potentially stopping withdrawals while deposited BTC remains locked and backs Aave debt. Babylon Labs posted its Request for Comment on Oct. 14, [opening the plan to Aave community review](). The design would add two Aave V4 Spokes: one for borrowing against native BTC and a second for liquidation settlement. The proposal remains in governance review, with community feedback and risk analysis ahead of a possible Snapshot vote. Depositors would lock BTC in a Taproot output on the Bitcoin network. Because Aave V4 accepts ERC-20 collateral, an internal token with eight decimals would record each position. It would be restricted to the integration and could not be traded or transferred elsewhere. Liquidations would draw WBTC from an Aave V4 Hub so permissionless liquidators could exchange seized vaults. A designated, permissioned group of arbitrageurs would later repay that Hub debt and redeem the underlying BTC, a Bitcoin-side process that takes multiple days. The route depends on WBTC liquidity and designated redemption actors. A freeze would stop new vault creation and borrowing but keep exit routes available. A pause would also block withdrawals and redemptions; repayments and liquidations would stop while it is active. “A pause cannot move or release the collateral,” Babylon Labs lead solution engineer 0xAleksaOpacic said. The proposed TBV controls give two multisigs immediate power to pause and unpause contracts: Interim Governance would use a four-of-seven Safe, and the Emergency Guardian a three-of-five Safe. The Guardian could unpause without Interim Governance’s approval, and one proposed Emergency Guardian seat is listed as “TBD.” A five-day timelock would apply to TBV contract upgrades and configuration changes, while the Guardian could cancel queued changes. Aave DAO would have a separate pauser role over the integration contracts and govern the Spokes and liquidity hubs, including listings, risk settings, caps and oracle configuration. Babylon governance representatives would control vault configuration and actor sets. Configuration of the BTC Vault Swap Spoke would be delegated to a two-of-three multisig representing Aave Labs, Llama Risk and Babylon Labs. Community feedback and risk analysis come before a possible Snapshot vote. If support is positive, a later onchain Aave Improvement Proposal would set final risk parameters and multisig details; the current request includes no launch date or final risk parameters. ## Links in this article - [opening the plan to Aave community review](https://www.tokenpost.com/news/technology/32416)