LlamaRisk recommends Aave V3 borrow and V4 draw cap cuts after Binance exploit

A new Aave Governance proposal, published October 30, recommends cutting selected borrow and draw caps across V3 and V4 to roughly 2% above the amounts outstanding immediately before the Binance hot wallet exploit. The filing comes one day after reserves were frozen in response to that incident.

Where the first filing addressed cap and IRM changes broadly, this one names specific reserves and credit lines, gives replacement limits, and directly addresses what happens to available capacity once the freeze ends.

LlamaRisk puts the aggregate effect at approximately $3.7 billion of unused borrow capacity removed on Aave V3 and $130 million on Aave V4 — about $3.83 billion combined. The recommendation covers V3 reserves and V4 spoke credit lines where more than $10 million was borrowed before the exploit and more than $10 million of capacity remained before the cap.

The logic is spelled out plainly. “Frozen reserves accept no new supply or borrowing, so borrow and draw caps have no effect during the freeze,” LlamaRisk wrote. “Once reserves are unfrozen, any unused capacity between outstanding debt and the cap becomes available at once.” LlamaRisk added that the exploiter still holds large ETH$2,230.67▼3.86%, stablecoin, and governance-token balances, and could use that headroom to build a large position in the first blocks after an unfreeze.

The USDC reduction gives a sense of scale:(2,700,000,000 - 2,270,000,000) / 2,700,000,000 = 15.9% of stated borrow capacity removed under the proposed limit.

On V4, the Ethereum Core Hub EtherFi Spoke WETH draw cap is recommended to drop from 60,000 to 41,100. GHO borrow-cap changes, including a reduction in the Aave V3 Core GHO cap from 150 million to 105 million, would be handled by the GHO Stewards.

The October 30 filing also supersedes part of what was proposed on October 29. That earlier package called for the Aave V4 Ethereum Core Hub Main Spoke USDC draw cap to rise from 36 million to 60 million, and USDG to rise from 75 million to 80 million; neither change had been executed. The prior V4 recommendation is documented in Aave Governance.

If the proposal is executed before the reserves are unfrozen, affected borrowers will face less immediately available borrowing capacity; the filing does not say when either the unfreeze or execution will occur.