Aave has restricted new deposits and borrowing against $136 million in tokenized Bitcoin after Threshold Network suspended tBTC minting and redemptions while conducting undisclosed security maintenance.
The Oct. 31 intervention followed Threshold's decision to halt operations on its Bitcoin bridge while conducting undisclosed security maintenance. In a security update that day, Threshold said the token remained fully backed, with approximately 4,320 BTC held in bridge wallets against 4,185 tBTC in circulation. “tBTC remains fully backed, and no funds have been lost,” the project stated, adding that investigators had found no unauthorized token minting. The reserves exceed the circulating supply by about 135 BTC.
tBTC lets Bitcoin holders deploy their assets as collateral for loans across decentralized finance, and the Aave market held roughly 42 percent of the token's circulating supply.
Threshold has not disclosed the specific security issue that prompted the suspension or provided a reopening date. Existing tBTC remains transferable across Ethereum and layer-2 networks, although new Bitcoin deposits, token minting and redemption requests are suspended. Pending transactions will be completed when operations resume.
The Aave freeze followed a recommendation from LlamaRisk, Aave's risk service provider, to immediately freeze tBTC on the protocol's Ethereum V3 Core market. Aave's guardian multisig executed the restriction at 10:01 UTC, preventing users from depositing additional tBTC or using the token to increase borrowing power. At the time, approximately 1,760 tBTC worth $136.6 million was supplied to the market. The restriction applies only to the Ethereum Core tBTC reserve, as the token's markets on Base and Arbitrum had already been frozen during earlier asset deprecation rounds. Existing users can continue repaying loans and withdrawing eligible collateral, while liquidations remain active under existing risk parameters.
Other DeFi risk managers have also moved to reduce exposure. Gauntlet disclosed that its Ethereum Morpho USDC Core vault had approximately 704,000 USDC supplied to a lending market backed by tBTC collateral. The firm placed the market on its emergency exclusion list and withdrew about 65,000 USDC in available liquidity, leaving around 640,000 USDC supplied. Gauntlet warned that the redemption suspension could affect tBTC's secondary-market liquidity and the ability of lenders to exit positions during liquidations, since tBTC holders seeking native Bitcoin must rely on secondary-market buyers while the redemption mechanism is suspended.
Threshold has urged users not to send Bitcoin to previously generated deposit addresses or repeat pending transactions, and pledged to provide another security update within 24 hours of its Oct. 31 announcement, or sooner if circumstances change.
Analysis
Why This Matters
- Aave's freeze blocks users from depositing more tBTC or using it to boost borrowing power, limiting how Bitcoin holders can tap DeFi loans during the suspension.
- With redemptions halted, tBTC holders who want native Bitcoin must turn to secondary markets, and Gauntlet warns weaker liquidity could complicate liquidations in lending vaults.
- The incident shows how a security review at one bridge operator can force risk teams across multiple protocols to restrict a widely used collateral asset.
Background
tBTC is a tokenized form of Bitcoin that runs on Ethereum and layer-2 networks, with Threshold Network holding Bitcoin reserves to back the tokens one-for-one. The asset is used as collateral in decentralized lending, and the Aave Ethereum market alone held about 42 percent of tBTC's circulating supply when the freeze was executed.
Key Perspectives
Threshold Network: says tBTC remains fully backed, no funds have been lost and no unauthorized token minting was found, and that bridge functionality will return after remediation, though it has not disclosed the security issue or a reopening date.
Aave and LlamaRisk: say the freeze was needed to contain exposure, and LlamaRisk will keep monitoring collateral positions and secondary-market liquidity before recommending that normal operations resume.
Gauntlet: warns that the redemption suspension could hurt tBTC's secondary-market liquidity and lenders' ability to exit during liquidations, and has placed its exposed market on an emergency exclusion list.
What to Watch
- Threshold's promised security update within 24 hours of its Oct. 31 announcement, and any reopening date for minting and redemptions.
- Whether tBTC trades at a sustained discount to Bitcoin while redemptions stay suspended, which would pressure collateral positions.
- Whether LlamaRisk recommends restoring Aave's tBTC market and how other protocols respond to the freeze.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedAave restricted a $136 million tBTC market after Threshold suspended Bitcoin redemptions.CryptoSlate: “Aave has restricted new deposits and borrowing against $136 million in tokenized Bitcoin after Threshold Network suspended tBTC minting and redemptions.”
- SupportedRisk managers moved to reduce exposure while Threshold said tBTC remained fully backed.CryptoSlate: “The suspension prompted Aave risk service provider LlamaRisk to recommend an immediate freeze of tBTC on the protocol's Ethereum V3 Core market.”
- SupportedThreshold said, “tBTC remains fully backed, and no funds have been lost.”CryptoSlate: ““tBTC remains fully backed, and no funds have been lost,” the project stated”
- SupportedThreshold suspended tBTC minting and redemptions while conducting undisclosed security maintenance.CryptoSlate: “The Oct. 31 intervention followed Threshold's decision to halt operations on its Bitcoin bridge while conducting undisclosed security maintenance”
- SupportedThreshold reported approximately 4,320 BTC in bridge wallets against 4,185 tBTC in circulation, a reserve excess of about 135 BTC.CryptoSlate: “approximately 4,320 BTC held in bridge wallets against 4,185 tBTC in circulation. “tBTC remains fully backed, and no funds have been lost,” the project stated”
- SupportedThreshold said investigators had found no unauthorized token minting.CryptoSlate: “the project stated, adding that investigators had found no unauthorized token minting.”
- SupportedThe Aave market held roughly 42% of tBTC's circulating supply.CryptoSlate: “At the time, approximately 1,760 tBTC worth $136.6 million was supplied to the market, representing roughly 42% of the token's circulating supply.”
- SupportedAave's guardian multisig executed the restriction at 10:01 UTC, blocking additional tBTC deposits and use of tBTC to increase borrowing power.CryptoSlate: “Aave's guardian multisig executed the restriction at 10:01 UTC, preventing users from depositing additional tBTC or using the token to increase borrowing power.”
- SupportedApproximately 1,760 tBTC worth $136.6 million was supplied to the Aave market.CryptoSlate: “At the time, approximately 1,760 tBTC worth $136.6 million was supplied to the market”
- SupportedThe restriction applied only to Aave's Ethereum Core tBTC reserve; Base and Arbitrum tBTC markets had already been frozen in earlier asset deprecation rounds.CryptoSlate: “The restriction applies only to Aave's Ethereum Core tBTC reserve, as the token's markets on Base and Arbitrum had already been frozen during earlier asset deprecation rounds.”
- SupportedGauntlet's Ethereum Morpho USDC Core vault had about 704,000 USDC supplied to a tBTC-backed lending market; after withdrawing about 65,000 USDC, about 640,000 USDC remained supplied.CryptoSlate: “approximately 704,000 USDC supplied to a lending market backed by tBTC collateral. The firm placed the market on its emergency exclusion list and withdrew approximately 65,000 USDC in available liquidity, leaving around 640,000 USDC supplied.”
- SupportedThreshold pledged another security update within 24 hours of its Oct. 31 announcement, or sooner if circumstances changed.CryptoSlate: “It pledged to provide another security update within 24 hours of its Oct. 31 announcement, or sooner if circumstances change.”
