Circle launches Bitcoin-backed USDC borrowing for institutional clients

Circle, a stablecoin issuer, has introduced a Bitcoin-backed borrowing service for institutional clients. This allows eligible Circle Mint customers to deposit Bitcoin as collateral and borrow USDC through onchain lending markets. The service, named Digital Asset-Backed Borrowing, enables customers to supply their minted Circle's wrapped Bitcoin token, cirBTC, as collateral to supported third-party lending markets on Arc or Ethereum.

Currently, Morpho is the first lending protocol supported, with plans to add Aave and other protocols. The launch comes as cirBTC goes live on Arc. Borrowed USDC is deposited directly into the customer's Circle Mint balance, with borrowing rates, collateral requirements, and liquidation thresholds determined by the third-party lending market.

The collateral is overcollateralized, with the customer controlling the wallet that sends the Bitcoin to third-party DeFi protocols instead of Circle. The service excludes New York clients. Circle previously launched cirBTC on Ethereum in June. Both launches follow Circle's recent rollout of its layer-1 blockchain, Arc, which targets stablecoin payments and financial markets.

Arc uses USDC as its native gas token and supports tokenized assets. This move aligns with a broader trend of providing institutional investors with crypto-backed borrowing options while keeping collateral within established custody arrangements.