Banking giant Standard Chartered has identified Aave as a potential beneficiary of tokenized assets as they move into decentralized finance (DeFi), saying the protocol could rebuild its position as a dominant onchain lending platform. According to a Wednesday research note from Geoff Kendrick, the bank's global head of digital assets research, active tokenized assets in DeFi could drive more deposits into Aave. The statement marks a bullish outlook for the largest DeFi lending protocol, which has faced headwinds in recent months.
Aave is a decentralized non-custodial liquidity protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralized (perpetually) manner. The protocol is built on the Ethereum blockchain and has expanded to multiple networks, including Polygon, Avalanche, and Arbitrum. With a total value locked (TVL) that once exceeded $20 billion, Aave has been a cornerstone of the DeFi ecosystem since its launch in 2020.
Impact of the KelpDAO Incident
The bank noted that Aave's recent performance had been weighed down by a broader decline in digital asset prices and the fallout from the April cybertheft involving KelpDAO. Standard Chartered said the $292 million incident affected Aave, contributing to a decline in the protocol's lending market share as assets exited the platform. However, the bank believes these negatives are poised to fade. “We think both of those negatives are poised to fade,” Kendrick wrote. “We forecast significant upside for digital asset token prices into year-end, and we think Aave has moved beyond the April incident.”
According to the research note, Aave's October 2025 deposit base of about $75 billion would have ranked alongside the 30th-largest US bank by deposits. This comparison highlights the scale Aave achieved before the downturn. The bank added that it expects Aave to recover part of that scale as tokenized assets become more widely used as collateral and sources of liquidity within DeFi.
Tokenized Assets as a Growth Driver
The Aave forecast extends Standard Chartered's tokenization thesis from decentralized trading to lending. In an earlier research note, the bank predicted that assets locked in DeFi could reach $2.7 trillion by 2030, driven by real-world assets (RWAs) and other crypto-native assets moving through onchain protocols. Tokenized RWAs—such as bonds, real estate, and commodities—are seen as a key catalyst for DeFi growth, as they bring trillions of dollars of traditional assets onto blockchain networks.
Aave has already taken steps to accommodate tokenized assets. The protocol's Aave V3 architecture supports assets like Circle's USDC and Maker's DAI, but also allows for the listing of permissioned and real-world asset-backed tokens. In recent months, several institutional players have shown interest in using Aave as a platform for borrowing against tokenized securities. Standard Chartered's own tokenization platform, Libeara, has been working with asset managers to issue tokenized funds, some of which could eventually be used as collateral on Aave.
Comparison to Traditional Banks
The deposit base comparison to the 30th-largest US bank underscores the disruptive potential of DeFi lending. Traditional banks rely on centralized balance sheets and regulatory frameworks, while Aave operates through smart contracts, offering transparency and accessibility. However, challenges remain, including regulatory uncertainty and the need for robust oracle infrastructure to ensure accurate pricing of tokenized assets. Aave's use of Chainlink price feeds mitigates some of these risks, but the protocol must continue to evolve to meet institutional standards.
Standard Chartered's endorsement is significant given the bank's reach and credibility in traditional finance. The bank has been actively involved in digital assets, having launched its own custody services for crypto and collaborated on central bank digital currency projects. In a previous research note, Standard Chartered identified Uniswap as a potential trading hub for tokenized markets, citing its scale, brand, and history of operating through multiple crypto market cycles. Now, the bank extends this thesis to lending, with Aave as the primary venue.
Future Outlook for Aave
While the immediate recovery depends on broader market conditions, Aave has several mechanisms to attract liquidity. The protocol's safety module, which holds AAVE tokens as a backstop against shortfalls, provides confidence to depositors. Additionally, Aave's governance process allows token holders to propose and vote on new features, such as the recent introduction of stable rate borrowing and the ability to isolate risk for volatile assets.
The DeFi lending sector as a whole is expected to grow as more traditional institutions tokenize their assets. BlackRock, Fidelity, and other asset managers have already filed for spot Bitcoin ETFs and explored tokenized money market funds. If these trends continue, the demand for decentralized lending platforms like Aave could surge. Standard Chartered's forecast of $2.7 trillion in locked assets by 2030 suggests a massive opportunity for protocols that can scale securely and maintain trust.
In the near term, Aave's TVL has stabilized after the KelpDAO incident, and new integrations with layer-2 networks are expanding its user base. The protocol recently completed a bug bounty campaign and passed external audits for its smart contracts. These steps are likely to reassure institutional investors considering entering the space. As Kendrick noted, “We think Aave has moved beyond the April incident.”
Standard Chartered's research team continues to monitor the development of tokenization in DeFi. The bank believes that as regulatory clarity improves and infrastructure matures, Aave will be well-positioned to capture a significant share of the growing market. The combination of its established brand, large liquidity pools, and permissionless nature makes it a natural choice for both retail and institutional borrowers seeking access to tokenized assets.
The broader market for digital assets is also showing signs of recovery. Bitcoin has rebounded from its lows in early 2025, and altcoins like Ethereum are experiencing increased onchain activity. Aave's native token, AAVE, has seen price movements correlated with the overall market, but the fundamental outlook based on deposits and usage remains strong. If tokenized RWAs gain traction as expected, Aave could once again rank among the largest deposit platforms globally.
In summary, the Standard Chartered note provides a comprehensive analysis of why Aave is poised for growth. The bank's bullish stance, combined with the protocol's inherent strengths, suggests that Aave will play a central role in the next phase of DeFi expansion. As tokenized assets bring traditional finance onchain, Aave's lending infrastructure will be crucial for liquidity provision and collateral management. The upcoming years will test the protocol's ability to handle increased demand, but its current trajectory indicates a promising future.
Source: Cointelegraph News