Circle Launches Bitcoin-Backed USDC Borrowing for Institutional Clients

Stablecoin issuer Circle has launched a Bitcoin-backed borrowing service for institutional clients, enabling eligible Circle Mint customers to use BTC holdings as collateral to mint USDC through onchain lending markets. The service, called Digital Asset-Backed Borrowing, allows customers to deposit Bitcoin, mint Circle's wrapped Bitcoin token cirBTC, and supply it as collateral to supported third-party lending protocols on Circle's Arc network or Ethereum. Morpho is the first lending protocol integrated, with Circle confirming plans to add Aave and additional protocols in the future.

Borrowed USDC is deposited directly into the customer's Circle Mint balance, while borrowing rates, collateral requirements, and liquidation thresholds are determined by the third-party lending markets. Borrowing positions are overcollateralized, with collateral supplied through a customer-controlled wallet to third-party DeFi protocols rather than lent directly by Circle. The service excludes New York clients. The launch coincides with cirBTC going live on Arc, Circle's layer-1 blockchain that uses USDC as its native gas token and supports tokenized assets including BlackRock's BUIDL and Circle's USYC. Circle previously launched cirBTC on Ethereum in June, with the token backed 1:1 by Bitcoin held in custody by Circle National Trust.

The move reflects a broader industry push to expand institutional access to crypto-backed borrowing while keeping collateral within established custody arrangements. 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. Bitcoin-backed models gained traction in March, when Lombard partnered with Bitwise on a system for borrowing against custody-held BTC using Morpho infrastructure, though unlike Circle's wrapped-token approach, Lombard's design keeps the underlying Bitcoin in custody without wrapping or bridging. BitGo also expanded its institutional lending platform in March, launching financing services for liquid, staked, and locked crypto assets held in custody under a portfolio-based collateral model.