Circle opens Bitcoin-backed USDC borrowing to institutions via Morpho

Circle has opened a Bitcoin-backed USDC borrowing service to institutional clients through a new product called Digital Asset-Backed Borrowing, letting holders tap liquidity against their BTC without selling it. The new offering restricts access to eligible Circle Mint customers and excludes New York clients from the launch.

A client deposits BTC, mints Circle's wrapped Bitcoin token cirBTC, and posts that token as collateral on a supported third-party lending market on Arc or Ethereum, with Morpho the first protocol supported and Aave and others planned. The borrowed USDC lands directly in the customer's Circle Mint balance, the same account they would use to mint USDC directly.

The mechanics matter for the holder because Circle does not set the borrowing rate, the collateral requirement, or the liquidation threshold. Those belong to the underlying lending market, and positions are overcollateralized, with collateral moving through a customer-controlled wallet to the third-party DeFi protocol.

What this actually changes

For an institution sitting on BTC, the pitch is that they can now borrow USDC while keeping their Bitcoin exposure intact, because they do not sell into the spot market or unwind a position to raise cash. They mint a Circle-controlled wrapper, post it as collateral on a market Circle selected, and receive USDC that sits in their Circle Mint account.

The trade-off is counterparty, because the lending market, not Circle, sets the cost of capital and the liquidation line, so if Morpho's parameters are tighter than the institutional borrower wants, there is no Circle fallback rate. Circle has positioned itself as the issuer of the wrapper and the destination for the borrowed USDC, with the credit risk sitting on a third-party protocol.

Circle's push beyond pure issuance

The launch lines up with two pieces of infrastructure Circle is building. cirBTC went live on Arc, Circle's layer-1 blockchain, on the same day as the borrowing announcement, and Arc uses USDC as its native gas token and supports tokenized assets including BlackRock's BUIDL and Circle's USYC, with both launches following the Arc mainnet rollout days earlier.

cirBTC itself launched on Ethereum in June, backed 1:1 by Bitcoin held in custody by Circle National Trust, and the Arc deployment this week extends that wrapper onto Circle's own chain, where USDC is the native asset and the lending market is one Circle has picked.

That sequence is the signal, because Circle has spent the past year selling USDC as the dollar leg of crypto trading, and now it is building the rails on which USDC gets lent, borrowed, and collateralized on a blockchain where USDC is the native asset. The borrowing product wraps around cirBTC on Arc, meaning the collateral, the loan, and the gas all live inside Circle-controlled infrastructure.

It is not the first institutional borrowing product to use crypto collateral, because in February, Anchorage Digital partnered with Kamino to let institutions borrow against staked SOL held at Anchorage Digital Bank. In March, BitGo expanded its institutional lending with a portfolio-based financing platform that uses multiple assets as collateral rather than posting per loan.

What is still missing

Circle has not published loan-to-value ratios, liquidation thresholds, or interest rate ranges, even though those are set per market, and the product page does not give even indicative ranges. It also does not say whether cirBTC is natively deployed on Arc or only wrapped there for collateral use, and New York clients are excluded without Circle saying why.