Circle launches Bitcoin-backed USDC borrowing for institutional clients
Stablecoin issuer Circle has launched a new Bitcoin-backed borrowing service tailored for institutional clients. The Digital Asset-Backed Borrowing program enables eligible Circle Mint users to leverage their Bitcoin by minting wrapped cirBTC tokens and using them as collateral for USDC loans through supported third-party lending protocols on the Arc and Ethereum blockchains. Morpho is the first integrated lending platform, coinciding with the recent launch of cirBTC on Arc. This initiative enhances institutional crypto lending access, offering secure and streamlined borrowing options secured by Bitcoin.
Mechanics of Bitcoin-Backed Borrowing
Circle announced the Digital Asset-Backed Borrowing service that allows clients to deposit Bitcoin, convert it into the wrapped cirBTC token, and use it as collateral to borrow USDC through supported third-party lending protocols. The first supported platforms include Morpho and the Arc blockchain, where cirBTC went live recently. Borrowed USDC is deposited directly into the customer’s Circle Mint account balance.
The loan positions are overcollateralized, with borrowing rates, collateral requirements, and liquidation thresholds governed by the third-party lending platforms. Collateral is supplied from wallets controlled by customers and lent to DeFi protocols rather than directly by Circle. Clients based in New York are excluded from this program.
cirBTC and the Arc Blockchain Launch
Circle originally launched cirBTC on Ethereum in June — a token fully backed 1:1 by Bitcoin held in custody by Circle National Trust. The new borrowing service release coincided with the launch of Circle’s Arc mainnet, a layer-1 blockchain designed for stablecoin payments and financial markets, which uses USDC as its native gas token.
Arc also supports tokenized assets such as BlackRock’s BUIDL and Circle’s USYC, reflecting growing industry interest in integrating crypto-native tools within traditional financial frameworks.
Institutional Crypto Lending Expands
Circle’s initiative forms part of a broader movement to expand crypto-backed borrowing options for institutional investors while ensuring collateral remains within established custody solutions. Earlier in February, Anchorage Digital partnered with Kamino to enable institutions to borrow against staked Solana held safely in qualified custody, offering onchain liquidity without moving underlying assets.
In March, Lombard partnered with Bitwise to enable borrowing against Bitcoin held in custody without wrapping or bridging, using Morpho as lending infrastructure. Additionally, BitGo launched a financing platform that permits borrowing and lending against various liquid, staked, and locked crypto assets held in custody, using a portfolio collateral model to support multiple assets simultaneously.
Why it matters
Circle’s introduction of Bitcoin-backed USDC borrowing is significant for the institutional market because it offers new avenues for accessing liquidity without moving assets out of trusted custody. This approach enhances the security of collateralized loans and broadens innovative financial products available to major market participants, laying groundwork for deeper integration of cryptocurrencies within traditional finance ecosystems.
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