Circle has introduced a new service that allows institutional clients to use Bitcoin as collateral for borrowing USDC through decentralized lending markets. The product, known as Digital Asset-Backed Borrowing, is available to qualifying Circle Mint customers and is designed to keep collateral management within existing custody relationships while tapping third-party liquidity.

Eligible customers deposit Bitcoin, which Circle converts into its wrapped token cirBTC. That token is then supplied as collateral to supported lending protocols. Borrowed USDC is credited directly to the customer’s Circle Mint balance. Positions are overcollateralized, and parameters including interest rates, collateral ratios and liquidation thresholds are set by the lending markets themselves rather than by Circle.

How the Borrowing Process Works

Collateral is posted from a customer-controlled wallet to the chosen protocol. Circle does not lend the assets directly. The structure is intended to give institutions a clear operational path that separates custody and wrapping from the risk and pricing mechanics of the underlying DeFi markets.

Morpho is the first protocol supported. Circle plans to add Aave and additional venues over time. The service operates on both the Arc network and Ethereum, depending on the deployment of each lending market.

New York clients are excluded from the offering.

cirBTC Goes Live on Arc

The borrowing service coincides with the availability of cirBTC on Arc. Circle previously introduced the token on Ethereum in June. Each cirBTC is backed one-to-one by Bitcoin held in custody. One regulatory description states that Circle International Bermuda Limited issues the token under supervision of the Bermuda Monetary Authority. Reserves can be verified in real time through an on-chain system provided by Chainlink.

Users can convert BTC, cbBTC or wBTC into cirBTC without fees on select routes, either through Arc’s native portals or via Circle Mint for institutional participants.

Arc itself opened its mainnet to the public only days earlier. The layer-1 network uses USDC as its native gas and settlement token and supports tokenized assets including BlackRock’s BUIDL and Circle’s USYC. Its initial validator set includes major financial institutions.

Supply data from mid-September showed roughly 949 cirBTC in circulation, valued at about $77 million, against reserves of approximately 951 BTC. A portion of the supply was already on Arc, with the remainder remaining on Ethereum.

Broader Context for Institutional Lending

The product fits a pattern of institutional offerings that seek to provide onchain liquidity while limiting disruption to established custody arrangements. Earlier this year, other platforms introduced comparable structures for assets held in qualified custody, including arrangements involving staked Solana and Bitcoin that avoided or minimized movement of the underlying holdings.

Circle’s approach relies on the conversion of deposited Bitcoin into cirBTC so the token can interact with existing lending markets that accept ERC-compatible collateral. Borrowed USDC remains within the Circle Mint environment, reducing the number of platforms institutions must manage for settlement and accounting.

Arc’s design, centered on stablecoin settlement, positions the network as an additional venue alongside Ethereum for these flows. The combination of a regulated wrapped Bitcoin token, direct credit of borrowed stablecoins into institutional balances, and third-party protocol risk management forms the core of the new service.