Curve Finance loans climb 68% in Q3 as DeFi lending recovery lags

Curve Finance has recorded a 68% rise in active loans to $70.9 million in Q3 2026, moving above its 2025 closing balance while total DeFi lending has remained below that benchmark, according to figures cited by the protocol.

DefiLlama data cited in Curve Finance’s quarterly update put the protocol’s outstanding loans above the $69 million recorded at the end of 2025. Across DeFi lending, the same comparison showed $32.8 billion in active loans at September’s close against $37.5 billion at the end of last year.

Within Curve’s lending business, the team attributed most of the quarterly increase to LlamaLend v2, which reached Optimism in June and Ethereum mainnet in July. According to its update, August delivered the strongest growth, led by markets involving yield-bearing stablecoins such as sreUSD, sfrxUSD, and syrupUSDC.

Curve Finance loan growth centers on yield-bearing collateral

In explaining the quarterly figures, Curve’s team pointed to borrowers seeking access to credit while retaining the income generated by their collateral.

“DeFi lending is recovering unevenly. Capital is moving toward places where assets can continue earning yield while being used as collateral,” the Curve Finance team said.

The team said LlamaLend v2 gives token issuers more options for creating lending markets around their assets, while borrowers can use holdings as collateral without surrendering their underlying yield.

Under the updated design, Curve said a lending pair no longer needs to include crvUSD as either the collateral or the borrowed asset. According to the protocol, issuers can instead build markets around other supported assets and participate in the fees generated by those markets.

As crypto.news reported on June 10, the initial Optimism rollout introduced three isolated markets: ETH against wstETH, wstETH against USDC, and WBTC against USDC.

At launch, Curve said borrowing caps for those markets were set at zero, allowing deposits before borrowing received governance approval. Its rollout announcement described separate collateral assets, price feeds, debt limits, and risk settings for each lending market.

For liquidity providers, Curve’s launch materials also described the ability to pledge pool tokens while continuing to earn trading fees. The protocol said the framework could accommodate other assets that generate income, including vault tokens and principal tokens used in fixed-yield strategies.

Proposed LP token market would let holders keep pool positions

Looking into Q4, Curve said demand from asset issuers supports further LlamaLend v2 market launches. Among the proposals identified by the team is a market accepting a reUSD/sfrxUSD liquidity provider token as collateral.

Under the proposal described in the update, holders could borrow against their LP tokens without first withdrawing their assets from the underlying pool. According to the team, the proposed market would extend borrowing access to holders of that specific pool position.

The proposal remains subject to a DAO vote, Curve said.

Alongside the collateral’s existing income, the team said borrowers can receive incentives paid in CRV. Curve also described a role for asset issuers in directing rewards toward selected markets to make borrowing more attractive.

For U.S. participants receiving digital asset rewards, the Internal Revenue Service says digital asset income is taxable and requires taxpayers to keep records of receipts and their dollar values. The agency also instructs taxpayers to answer “yes” to the federal return’s digital asset question when they receive tokens as rewards or awards.

In its reporting guidance, the IRS distinguishes merely holding digital assets from receiving rewards or disposing of tokens. According to the agency, taxpayers must report applicable digital asset transactions whether or not they produce a taxable gain or loss.

Gradual liquidations depend on market settings and execution

For borrowers managing falling collateral prices, Curve said LlamaLend uses a liquidation range rather than relying only on a single price at which a position closes.

According to the team, borrowers select their leverage and the width of the range over which collateral gradually converts into the borrowed asset. Curve said a sudden price decline therefore does not necessarily require the entire loan to close immediately.

In separate comments published Oct. 8, Curve linked the performance of its LLAMMA liquidation mechanism to transaction execution on Ethereum. Its assessment of Ethereum’s Glamsterdam upgrade said cheaper, faster arbitrage could help the mechanism follow market prices as collateral moves through its liquidation range.

Based on Curve’s mainnet checks, a leveraged borrowing transaction consumed about 1.84 million gas, compared with 125,000 for a direct stablecoin swap. The team said borrowers, liquidators, and oracle updates compete for blockspace during sharp market moves.

According to that assessment, additional capacity could help transactions enter blocks during heavy demand, although Curve cautioned that revised charges for state operations could raise gas requirements for some activities.

Curve DAO has assigned lending oversight to yRisk

During the quarter, Curve DAO also approved a new risk-management provider for crvUSD and LlamaLend, according to Sep. 4 reporting on its governance decision.

The Sep. 2 vote assigned yRisk a twelve-month mandate covering collateral reviews, liquidity, oracle design, concentration, and governance risks. Under the approved arrangement, the provider can recommend debt ceilings, market settings, and other controls, while Curve governance and its emergency DAO retain final decision-making authority.

According to the approved funding terms, yRisk will receive 125,000 frxUSD and 568,181 CRV through separate, revocable vesting streams lasting one year.