Circle Launches Bitcoin-Backed USDC Borrowing for Institutions

Stablecoin issuer Circle has rolled out a Bitcoin-backed borrowing service that lets institutional clients tap BTC holdings for USDC liquidity without selling their underlying assets. The product, called Digital Asset-Backed Borrowing, is available to eligible Circle Mint customers who deposit Bitcoin and mint Circle's wrapped Bitcoin token, cirBTC. That token is then supplied as collateral to supported third-party lending protocols on Circle's Arc blockchain or Ethereum. Morpho is the first protocol integrated, with Aave and additional markets slated for future support.

The mechanics are fully onchain and overcollateralized. Borrowing rates, collateral requirements, and liquidation thresholds are set by the third-party lending market, not by Circle itself. USDC proceeds are credited directly to the customer's Circle Mint balance, while collateral is held in a customer-controlled wallet routed through DeFi protocols rather than lent bilaterally by Circle. New York clients are excluded from the offering. The launch coincides with cirBTC going live on Circle's new Arc mainnet, a layer-1 blockchain purpose-built for stablecoin payments and financial markets that uses USDC as its native gas token and supports tokenized assets including BlackRock's BUIDL fund and Circle's USYC money market product.

Circle's move is part of a wider institutional push toward crypto-backed borrowing within qualified custody. In February, Anchorage Digital partnered with Kamino to enable borrowing against staked Solana held at Anchorage Digital Bank. Lombard and Bitwise followed in March with a BTC-collateralized lending system built on Morpho infrastructure, though Lombard's design keeps the underlying Bitcoin in custody without wrapping or bridging it. BitGo also launched a portfolio-based financing platform in March that supports borrowing against liquid, staked, and locked crypto assets held in custody. Circle's cirBTC itself launched on Ethereum in June and is backed 1:1 by Bitcoin held by Circle National Trust.

The institutional lending landscape is consolidating around a common thesis: let large holders put idle crypto to work without triggering taxable sales or leaving regulated custody. For Circle, the new product deepens USDC utility while funneling institutional volume through Arc at a time when the company is competing with Tether and a growing roster of bank-issued stablecoins for dominance in tokenized finance infrastructure.