Circle launches Bitcoin-backed USDC borrowing for institutional clients

Circle introduces Bitcoin-backed borrowing for institutions

Circle has launched a service that allows institutional clients to borrow USDC using Bitcoin as collateral, without needing to sell their BTC. The service, called Digital Asset-Backed Borrowing, is available to eligible Circle Mint customers.

Users deposit Bitcoin, mint Circle's wrapped Bitcoin token cirBTC, and supply it as collateral on supported lending markets. The borrowed USDC goes directly into the customer's Circle Mint balance. Borrowing rates, collateral requirements, and liquidation thresholds are determined by the third-party lending market, not by Circle. Positions are overcollateralized, and collateral is held through customer-controlled wallets connected to third-party DeFi protocols. Clients in New York are excluded from the service.

How the borrowing service works

• Eligible Circle Mint customers can deposit Bitcoin as collateral.
• Bitcoin is converted into cirBTC, which is supplied to supported lending markets.
• Morpho is the first supported lending protocol, with Aave and others planned.
• Borrowed USDC is deposited directly into the customer's Circle Mint balance.
• Collateral requirements and liquidation thresholds are set by the third-party lending market.
• New York-based clients are excluded from the service.

CirBTC and the Arc blockchain

The launch coincides with cirBTC going live on Arc, Circle's layer-1 blockchain designed for stablecoin payments and financial markets. Circle had previously launched cirBTC on Ethereum in June. The token is backed 1:1 by Bitcoin held in custody by Circle National Trust. Arc uses USDC as its native gas token and supports tokenized assets including BlackRock's BUIDL and Circle's USYC.

Institutional crypto lending expands

Circle's launch comes as more companies offer institutions ways to borrow against crypto holdings while keeping assets in custody. In February, Anchorage Digital partnered with Kamino to let institutions borrow against staked Solana held at Anchorage Digital Bank without moving collateral out of qualified custody. In March, Lombard partnered with Bitwise to build a borrowing system for BTC held in custody using Morpho as infrastructure. Unlike Circle's approach, Lombard's system keeps the underlying Bitcoin in custody without wrapping or bridging it. BitGo also expanded its institutional lending platform in March, allowing multiple assets to serve as collateral across a portfolio-based model.

What is confirmed

Circle has confirmed the launch of Digital Asset-Backed Borrowing, its partnership with Morpho as the first lending protocol, and the planned expansion to Aave and other protocols. CirBTC was previously launched on Ethereum in June and is backed 1:1 by Bitcoin in Circle National Trust custody. Arc mainnet went live shortly before this announcement.

What is still unclear

Details such as specific collateral ratios, interest rate ranges, and which institutions qualify have not been disclosed. The timeline for Aave and other protocols joining the platform has not been provided.

Why it matters

The service gives institutions a way to access liquidity from their Bitcoin holdings without triggering taxable sales or giving up exposure to Bitcoin's price movement. It also reflects a broader trend of traditional finance and crypto companies building infrastructure that lets institutions use onchain lending while keeping assets in established custody arrangements.

What happens next

Circle plans to add Aave and other lending protocols to the platform. The rollout of cirBTC on Arc is now live, enabling the borrowing service to operate across both Arc and Ethereum networks.

Sources

• Cointelegraph

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