Kraken eyes 15% stake in Aave at $385 million valuation

Kraken has entered discussions to acquire a 15% stake in decentralized finance lending protocol Aave through its parent company Payward, in a deal that values the protocol at $385 million.

According to a Coindesk report, Kraken is reportedly negotiating a strategic investment in decentralized finance lending protocol Aave that could expand parent company Payward’s push into blockchain-based financial infrastructure, CoinDesk reported, citing three people familiar with the matter.

The proposed transaction would see Kraken invest 35,000 ETH in exchange for 250,000 AAVE tokens and a 15% common equity stake in Aave Group. A document reviewed by the publication valued the deal at approximately $385 million.

Two people familiar with the discussions told CoinDesk that Kraken also plans to syndicate part of the transaction, which carries an estimated value of about $71 million. A Kraken spokesperson declined to comment, while Aave did not respond to CoinDesk’s request for comment before publication.

Investment would expand Payward’s DeFi strategy

A third source familiar with Payward’s plans said that the proposed Aave investment would become the first in a series of transactions under Payward Asset Management, a business the company intends to use for investments across decentralized finance and other digital asset opportunities. The source added that Payward has sufficient capital and external partners to support similar deals.

Aave operates the largest decentralized lending protocol, where users lend and borrow digital assets through smart contracts without intermediaries. Lenders supply assets to liquidity pools to earn yield, while borrowers provide crypto collateral to secure loans.

The protocol faced one of its biggest tests in April after attackers linked to North Korea’s Lazarus Group exploited KelpDAO’s cross chain bridge to mint about $292 million in unbacked rsETH. 

The attackers deposited those tokens into Aave as collateral before borrowing real assets, leaving the protocol with an estimated $190 million to $230 million in bad debt after the collateral lost its value.

Aave’s smart contracts were not compromised during the incident, but panicked users nevertheless withdrew more than $8 billion from the protocol after the exploit.

Kraken continues expansion beyond crypto trading

The proposed investment follows a series of acquisitions and product launches by Payward as it expands beyond spot cryptocurrency trading and prepares for a potential public listing.

In April, Payward agreed to acquire U.S. crypto derivatives platform Bitnomial for up to $550 million in cash and stock. The acquisition gives the company access to Bitnomial’s designated contract market, derivatives clearing organization, and futures commission merchant registrations issued by the U.S. Commodity Futures Trading Commission, allowing Payward to build a fully integrated regulated derivatives business.

Payward has also expanded its tokenized securities business. In June, Payward Services introduced a tokenized IPO program that will allow Kraken users and selected xStocks Alliance members to register interest in U.S. public offerings before companies begin trading. The company said successful applicants will receive tokenized shares backed one-to-one by the underlying stock at the IPO price on listing day.

Payward Services disclosed that its xStocks network processed more than $30 billion in transaction volume during its first year, including over $6 billion settled on chain, while serving more than 125,000 holders worldwide.