Citi Research Sees Aave’s Potential in Tokenized Capital Markets and Collateral Mobility

Citi Research released a 24-page report on October 19, 2026, reframing the Aave lending protocol as a decentralized collateral mobility ecosystem rather than just a crypto-native money market. Analysts Peter Christiansen and Aditi Balachandran argue that as tokenization expands into Treasuries, private credit, and equities, the ability to efficiently finance and repledge these assets will become a critical market function. The report highlights how Aave’s architecture, including its institutional Horizon market, addresses traditional finance inefficiencies like idle collateral and slow settlement cycles. Currently, the Horizon market demonstrates this utility, with the Janus Henderson Anemoy AAA CLO Fund (JAAA) holding approximately $51.9 million in deposits. Citi suggests that Aave’s existing infrastructure could eventually absorb roles currently held by triparty agents and securities lenders. While the report notes challenges in risk calibration and looping behaviors, it emphasizes that tokenization allows yield-bearing assets to serve as collateral without requiring forced sales. This analysis marks a significant institutional recognition of DeFi protocols as essential infrastructure for the future of global securities finance.