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Chaos Labs Walks Away From Aave as V4 Complexity Mounts

Chaos Labs Walks Away From Aave as V4 Complexity Mounts

Plus: 🔮 Polymarket builds its own stablecoin 💰 Ethena overhauls USDe reserves ⚖️ SEC safe harbor hits White House desk

Laura Shin
April 07, 2026

Hi! In today’s edition:

🚪 Chaos Labs terminated its three-year Aave risk management partnership, rejecting a $5 million renewal and citing V4's expanded workload
🔮 Polymarket announced a native USDC-backed stablecoin and a rebuilt trading engine in its biggest platform upgrade to date
💰 Ethena diversified USDe backing beyond perpetual futures, adding institutional lending and real-world assets
⚖️ SEC Chair Paul Atkins confirmed the Regulation Crypto Assets safe harbor proposal has reached the White House for final review

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Chaos Labs Walks Away From Aave as V4 Complexity Mounts

Chaos Labs ended its three-year risk management partnership with Aave, rejecting a $5 million renewal offer it called financially unsustainable. The firm, which priced every loan on Aave since November 2022 and oversaw growth from $5.2 billion to more than $26 billion in TVL with zero material bad debt, said the engagement had operated at a loss the entire time.

CEO Omer Goldberg pointed to the looming Aave V4 upgrade as the breaking point, arguing the new architecture would effectively double operational workload without a matching increase in resources. Chaos estimated it would need at least $8 million annually to cover both V3 and V4, roughly 5.6% of Aave's $142 million in 2025 revenue.

The departure follows exits by ACI and BGD Labs, deepening questions about contributor retention in DeFi's largest lending protocol.

Polymarket to Launch Its Own Stablecoin in Biggest Upgrade Yet

Polymarket is rolling out a ground-up overhaul of its trading infrastructure, headlined by a new collateral token called Polymarket USD that replaces the bridged USDC.e currently used on Polygon. The stablecoin is backed 1:1 by Circle's USDC but opens the door to yield generation and potential new revenue streams for the platform.

Under the hood, the upgrade brings a rebuilt matching engine, faster execution, lower gas costs, and support for smart contract wallets via EIP-1271 signatures. All existing order books will be cleared during the transition, which rolls out over the coming weeks.

The platform also confirmed plans for a native POLY token, though prediction market odds put the chances of a launch before May at just 11%.

Ethena Diversifies USDe Backing Beyond Perps

Ethena Labs is revamping the reserves behind its synthetic dollar USDe, shifting away from the perpetual futures strategy that once defined the stablecoin. Perp positions now make up just 11% of USDe backing, down from being the dominant component, with the rest sitting in stablecoin reserves and DeFi lending.

The new strategy adds four pillars: overcollateralized institutional lending through Anchorage Digital, Maple, and Coinbase Asset Management; expanded real-world assets including CLOs and investment-grade bonds; equity and commodity basis trades; and prime lending to trading firms.

The governance token ENA rose roughly 7% on the news, suggesting investors see the move as reducing the concentration risk that has long been USDe's biggest vulnerability.

SEC's Crypto Safe Harbor Proposal Lands at White House for Final Review

SEC Chair Paul Atkins confirmed at an event hosted by Vanderbilt University and the Blockchain Association in Nashville that the agency's Regulation Crypto Assets proposal has been submitted to the White House's Office of Information and Regulatory Affairs for review, the final step before formal publication. "We will have reg crypto that we will be proposing here shortly," Atkins said.

The framework builds on Commissioner Hester Peirce's earlier Token Safe Harbor concept and includes three components: a startup exemption allowing early-stage projects to raise up to roughly $5 million over four years, a broader fundraising exemption covering up to about $75 million annually under stricter disclosures, and an investment contract safe harbor that shields tokens once a project team stops performing promised managerial duties.

Tune into DEX in the City today at 12pm ET!

SEC Commissioner Hester Peirce and Sumeera Younis of the Crypto Task Force join KK, Vy and Jessi! Be sure not to miss this special episode!

📈 U.S. spot bitcoin ETFs recorded $471 million in net inflows on April 6, their strongest daily intake since February, led by BlackRock's IBIT at $181.9 million, Fidelity's FBTC at $147.3 million, and ARK's ARKB at $118.8 million.
📊 Strategy reported a $14.5 billion unrealized loss on its bitcoin holdings for Q1 2026 after BTC fell roughly 23%, then immediately resumed buying with a $330 million purchase that brought total holdings to 766,970 BTC. MSTR stock rose about 6% on the news, signaling investors remain comfortable with the strategy.
🤖 Anthropic signed a multi-gigawatt compute deal with Google and Broadcom for next-generation TPU capacity, intensifying competition with bitcoin miners for cheap power as AI buildouts become one of the largest new sources of U.S. electricity demand.
⚖️ A Third Circuit panel ruled 2-1 that New Jersey cannot shut down Kalshi's sports prediction markets, holding that the company's products fall under federal CFTC jurisdiction rather than state gambling law, in a big win for Kalshi. The ruling is the first federal appellate decision on prediction market regulation and follows CFTC lawsuits against three other states attempting similar enforcement.
⚠️ Phantom wallet reported a temporary service outage that caused token prices and balances to display incorrectly, alarming users across Solana and Ethereum before the team confirmed assets were safe and resolved the issue.
🔗 Polygon announced the Giugliano hard fork, scheduled for April 8 at block 85,268,500, which lets block producers announce blocks earlier to reduce the time users wait for transaction finality.
🔒 The Solana Foundation launched STRIDE, a security program that evaluates DeFi protocols across eight pillars and provides ongoing threat monitoring for projects above $10 million in TVL, with formal verification for those above $100 million.

🏦 Jamie Dimon publicly warned that JPMorgan must accelerate its blockchain efforts because tokenization, stablecoins, and smart contracts are emerging as direct competitors to traditional banking's core fee income and deposit base.
🇷🇺 Russia's central bank is betting on a September 2026 digital ruble launch to fight corruption and circumvent sanctions, but 51% of Russians say they are unwilling to use it and Sberbank's CEO publicly questioned why it's needed at all.

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