Aave has proposed raising GHO’s base borrowing rate on its Horizon market to 3.25% from 3.00%, after the stablecoin traded between 6.7 and 13.6 basis points below its $1 target over the preceding 30 days. The latest reading in the September 14 parameter update put GHO 12 basis points below par, according to the Aave Governance Forum proposal.
The proposed 25-basis-point increase sits alongside changes to Stability Module redemption fees on Ethereum, Monad and Arbitrum. Aave’s stated aim is to address supply and selling dynamics that have accompanied a sharp expansion of GHO borrowing on Horizon.
Horizon borrowing growth and GHO’s discount
GHO debt on Horizon rose to 39.0 million from 23.2 million during the 30-day period cited by Aave, a 68% increase. The protocol’s stewards linked the expansion in part to selling pressure created when users borrow GHO through leveraged strategies and exchange it for other stablecoins.
Independent market data from Aavescan showed 39.0 million GHO borrowed on Horizon as of September 12, with the market’s GHO borrowing rate at 3.00%. Those figures corroborate the debt and rate levels used in the subsequent governance update.
The discount described in the proposal is modest in dollar terms, but it is material for a stablecoin designed to trade at $1. Aave’s package focuses on the mechanisms available within its markets: changing the cost of new borrowing and altering the fees attached to routes through the Stability Module.
Leveraged GHO loops
According to Aave, Horizon’s comparatively low borrowing cost has supported looping strategies in which users mint GHO, use it in further leveraged positions and sell the borrowed tokens into other stablecoins. That activity can add GHO supply to the market while creating immediate sell flow, the proposal said.
Raising the Horizon base rate by 25 basis points would make that borrowing incrementally more expensive without eliminating its pricing advantage relative to Aave’s other GHO markets. Even after the proposed adjustment, Horizon would remain below the 3.84% base rate on Prime and the 4.25% rate on Core.
The relative rates are central to the proposed change. Rather than bringing Horizon into line with Prime or Core, Aave is recommending a narrower adjustment to the market where debt grew from 23.2 million to 39.0 million over a month. The governance post does not present the rate move as a standalone solution; it pairs it with changes to the Stablecoin’s redemption framework.
Official chart showing GHO’s price discount versus Horizon GHO debt from August 15 to September 14, 2026. — Source: Aave Governance Forum / TokenLogic
Stability Module fees across chains
Aave also proposes increasing the USDC redemption fee to 15 basis points from 10 basis points on Ethereum, Monad and Arbitrum. The fee for Ethereum USDT would move in the other direction, falling to 10 basis points from 15 basis points.
Those divergent changes would reshape the relative cost of redemption routes rather than applying a single fee increase across all supported assets. In practical terms, the proposal makes USDC redemptions more expensive on each of the three named networks while reducing the charge for the Ethereum USDT route.
Monad would receive a separate capacity change. Its GHO reserve limit would double to 50 million from 25 million, under the same September parameter proposal.
Taken together, the measures target both sides of the dynamics identified by Aave: the price of borrowing GHO on Horizon and the economics of exchanging GHO through Stability Module liquidity. The proposal records a 12-basis-point discount at its latest observation, while setting out changes intended to alter incentives across Horizon, Ethereum, Monad and Arbitrum.
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Source: Crypto Daily