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Kraken Weighs 15% Stake in Aave DeFi Protocol Valued at $385 Million

The possible deal comes after the KelpDAO exploit, which hit Aave through bad debt and more than $8 billion in withdrawals. Kraken wants to strengthen its position in DeFi alongside regulated trading services.

By Luc Vesters
• 2 min read
Kraken Weighs 15% Stake in Aave DeFi Protocol Valued at $385 Million

Key Takeaways

  • Kraken, part of Payward, is discussing a possible 15% investment in Aave, with an estimated valuation of $385 million.
  • The KelpDAO exploit led to billions of dollars in withdrawals and an estimated $190 million to $230 million in bad debt at Aave.
  • The proposed deal includes 35,000 ether for 250,000 AAVE tokens and a 15% stake in Aave Group.

Kraken, part of Payward Inc., is in talks about a possible 15% investment in the decentralized lending protocol Aave, with the company valued at an estimated $385 million (€339 million). This move comes after the fallout from the KelpDAO exploit in April, which triggered billions of dollars in withdrawals even though Aave's own smart contracts were not hacked.

Aave's Position and Recent Challenges

Aave, the biggest decentralized lending protocol, lets users lend and borrow crypto assets without middlemen. The platform runs on liquidity pools where depositors earn interest, while borrowers use crypto as collateral. Even though Aave itself was not hacked, the KelpDAO exploit put the protocol under pressure by creating a large amount of bad debt, estimated at between $190 million (€168 million) and $230 million (€203 million). That led to a massive outflow of more than $8 billion (€7.1 billion) in deposits, highlighting the risks of interconnectedness within DeFi.

Kraken's Investment Strategy and Future Plans

The proposed deal includes an investment of 35,000 ether (ETH) in exchange for 250,000 AAVE tokens and a 15% equity stake in Aave Group. Kraken is also exploring the possibility of syndicating this investment, which is worth about $71 million (€62.6 million). This move is part of a broader Payward strategy to diversify its portfolio and take a more active role in DeFi and other investment opportunities. Earlier this year, Payward acquired the crypto derivatives exchange Bitnomial, strengthening its regulated trading infrastructure ahead of a possible public listing.

These investments show Kraken and Payward positioning themselves as major players in the growth of the crypto market, betting on both regulated trading services and innovative DeFi products. The mix of a strong focus on infrastructure and strategic stakes in leading protocols like Aave could help boost their competitive edge.

Why This Matters for European Crypto Investors

For European crypto investors, this development could point to a growing connection between regulated exchanges and DeFi protocols. A major player like Kraken getting involved with Aave could further support adoption and legitimacy for decentralized lending. That fits into a broader re-rating of leading protocols; Grayscale recently called Aave undervalued based on its revenue and institutional adoption. This could also matter in the context of Europe's MiCA rules, which are aimed at regulating crypto services and making the sector more transparent and secure.

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