Circle has launched Digital Asset-Backed Borrowing for eligible Circle Mint institutions, allowing customers to deposit Bitcoin, mint cirBTC and borrow USDC through third-party lending markets on Arc or Ethereum.
Summary
- Circle has launched Bitcoin-backed USDC borrowing for eligible institutional Circle Mint customers on two networks.
- Morpho is the first supported lending protocol, with Aave expected to join Circle’s service later.
- cirBTC reserves currently exceed token supply, with Circle publishing backing data directly for public verification.
- New York customers remain excluded, while borrowing terms and liquidations depend on third-party markets entirely.
- Arc’s cirBTC Morpho market shows $18.86 million borrowed with an 86% liquidation loan-to-value threshold.
Circle said on Sept. 21 that the service combines the steps needed to turn native BTC into onchain collateral and return borrowed USDC to a customer’s Circle Mint balance. Morpho is the first supported lending protocol, while Circle says Aave and other platforms are expected to follow.
Customers retain exposure to the BTC supporting their cirBTC position instead of selling the asset to obtain dollar liquidity. The borrowing position remains overcollateralized, with interest rates, collateral limits, liquidation thresholds and available liquidity set by the selected lending market instead of Circle.
Circle Mint routes BTC through third-party lending markets
Using the new workflow, an eligible institution deposits BTC and mints Circle Wrapped Bitcoin, or cirBTC. The customer then transfers cirBTC into a user-controlled Smart Wallet, posts the token as collateral with a supported protocol and borrows USDC. Borrowed funds move from the Smart Wallet into the customer’s Circle Mint balance automatically.
Repayment works through the same interface. A customer can send USDC from Circle Mint into the Smart Wallet and repay part or all of the outstanding debt. Collateral becomes available as debt is repaid, subject to the rules of the lending protocol controlling the position.
Circle does not provide the underlying credit. Its legal terms state that Circle Technology Services supplies the interface and Smart Wallet technology, while lending, collateral management and liquidations occur through third-party DeFi protocols and their smart contracts. Assets moved into the Smart Wallet are no longer held within the regulated Circle Mint environment.
Circle Mint remains an institutional service. Individual retail users cannot open standard Mint accounts, while Digital Asset-Backed Borrowing carries further jurisdiction and eligibility requirements. Circle says New York customers are excluded from the borrowing product.
Morpho starts with live cirBTC-USDC markets on Arc
Morpho provides the first lending infrastructure supported by the Circle Mint borrowing workflow. On Arc, the protocol currently operates a USDC market using cirBTC as collateral with an 86% liquidation loan-to-value threshold.
Live Morpho data viewed Sept. 22 showed $18.86 million in outstanding borrowing against $157.85 million of available liquidity. The market held $176.71 million in total size with utilization at 10.67%. No realized or unrealized bad debt was displayed at the time of verification.
Those figures can change as users supply liquidity, borrow, repay or withdraw funds. Circle’s terms make clear that displayed rates and protocol parameters come from third parties and can move without Circle controlling them. Automatic liquidation can occur if collateral values, oracle readings, interest charges or protocol settings push a position beyond the applicable limit.
Morpho had moved onto Arc when Circle’s Layer 1 went public on Sept. 16. As previously reported, the Arc mainnet launched with USDC as its native gas asset, while Morpho and Aave supplied lending infrastructure alongside applications for trading and tokenized assets.
Morpho said before the DABB release that institutional Circle Mint customers would gain access to its Arc credit markets directly through Circle’s interface. The protocol has separately proposed a $50,000 monthly incentive budget for Arc borrowing activity under its governance process.
cirBTC reserves remain above outstanding token supply
cirBTC provides the collateral connecting native Bitcoin with the Ethereum and Arc smart-contract environments. Circle first introduced the asset on Ethereum in June before bringing it to Arc on Sept. 21.
As previously reported, Circle’s cirBTC launch on Ethereum introduced 1:1 Bitcoin backing alongside Chainlink Proof of Reserve. The structure lets market participants inspect reserve information while native Bitcoin remains held separately from the circulating wrapped tokens.
Current Circle data showed 948.7508 cirBTC outstanding against 951.2586 BTC in reserves at the time of verification. Arc accounted for 396.9919 cirBTC, while Ethereum carried 551.7590 cirBTC. The displayed reserve value stood at roughly $77.19 million.
Circle says the underlying Bitcoin is held through its Bermuda affiliate and safeguarded by Circle National Trust in segregated accounts for cirBTC holders. Circle National Trust received final approval from the Office of the Comptroller of the Currency in July to operate as a federally chartered national trust bank.
The OCC charter permits the trust bank to provide regulated digital asset custody services. Circle National Trust does not accept deposits or make loans, and digital assets held there are not FDIC insured.
Circle states that cirBTC reserves are not lent, pledged or rehypothecated. Chainlink Proof of Reserve publishes reserve information onchain, while Circle lists Bitcoin reserve addresses so counterparties can compare native BTC holdings with circulating cirBTC supply.
Circle keeps DeFi credit outside regulated Mint custody
Circle’s legal documentation draws a line between the Circle Mint account and the DeFi borrowing position. Once collateral leaves Circle Mint for the Smart Wallet, Circle Internet Financial no longer holds those assets under the controls applying to balances kept inside Mint.
Customers control the Smart Wallet through a two-of-two multiparty computation key-management system. Circle says it cannot independently initiate, reverse or cancel blockchain transactions from the wallet. Borrowers remain responsible for monitoring their positions, maintaining collateral and reviewing protocol risks.
Liquidations are controlled by the selected lending protocol. Circle warns that falling collateral values, changing rates, oracle movements or revised market parameters can trigger an automatic liquidation without prior notice, potentially resulting in penalties or collateral losses.
Circle’s institutional USDC network has been expanding through other regulated financial channels. In related coverage, BNY began providing USDC minting, redemption, custody and transfers for institutional clients in June, while Standard Chartered introduced bank-led access to USDC minting and redemption in July.
Circle says Morpho is the first supported protocol for Digital Asset-Backed Borrowing and “support for additional protocols, including Aave, will follow as the product develops.” No timetable has been announced for Aave integration or additional blockchain deployments.
Arc support arrived five days after the network’s Sept. 16 public mainnet launch. The Arc release says cirBTC can now be used within credit, trading, lending, settlement and treasury applications built on the network, with native BTC remaining in custody while cirBTC circulates through smart contracts.
Be the first to comment