Circle Launches Bitcoin-Backed USDC Borrowing Service

Circle Unveils Institutional Bitcoin-Backed USDC Borrowing via DeFi Protocols

Circle announced on September 21, 2026, the launch of Digital Asset-Backed Borrowing for eligible Circle Mint LLC customers, introducing a streamlined workflow that allows institutions to deposit native Bitcoin ($BTC), mint Circle Wrapped Bitcoin (cirBTC), and borrow $USDC through third-party lending markets on the Arc and Ethereum networks. The product combines what were previously separate steps—custody, wrapping, and DeFi borrowing—into a single coordinated interface, with Morpho serving as the inaugural supported lending protocol.

Digital Asset-Backed Borrowing is now available in Circle Mint for eligible Circle Mint LLC customers.Deposit $BTC. Mint cirBTC. Borrow $USDC.Through one coordinated workflow, customers can use $BTC-backed cirBTC as collateral through supported third-party lending markets on Arc… the company posted on its official X account on September 21.

How the Borrowing Workflow Operates

Under the new workflow, an eligible institution deposits Bitcoin into Circle Mint and mints cirBTC, a 1:1 Bitcoin-backed token. The customer then transfers cirBTC into a user-controlled Smart Wallet, posts the token as collateral with a supported protocol such as Morpho, and borrows USDC. Borrowed funds move automatically from the Smart Wallet into the customer’s Circle Mint balance. Repayment follows the same path: USDC sent from Circle Mint into the Smart Wallet repays part or all of the outstanding debt, freeing collateral subject to the lending protocol’s rules.

Circle emphasizes that it does not provide the underlying credit. Its legal terms state that Circle Technology Services supplies the interface and Smart Wallet technology, while lending, collateral management, and liquidations occur entirely through third-party DeFi protocols and their smart contracts. Assets moved into the Smart Wallet are no longer held within the regulated Circle Mint environment. Circle Mint remains an institutional service; individual retail users cannot open standard Mint accounts, and Digital Asset-Backed Borrowing carries additional jurisdiction and eligibility requirements. Circle confirmed that New York customers are excluded from the borrowing product.

Morpho Leads on Arc with Live cirBTC-USDC Markets

Morpho provides the first lending infrastructure integrated with the Circle Mint borrowing workflow. On Arc, the protocol operates a USDC market using cirBTC as collateral with an 86% liquidation loan-to-value threshold. Live Morpho data viewed on September 22 showed $18.86 million in outstanding borrowing against $157.85 million of available liquidity. The market held $176.71 million in total size with utilization at 10.67%, and no realized or unrealized bad debt was displayed at the time of verification. These figures fluctuate as users supply liquidity, borrow, repay, or withdraw funds.

Circle’s terms make clear that displayed rates and protocol parameters come from third parties and can change without Circle’s control. Automatic liquidation can occur if collateral values, oracle readings, interest charges, or protocol settings push a position beyond the applicable limit. Morpho had moved onto Arc when Circle’s Layer 1 went public on September 16. As previously reported, the Arc mainnet launched with USDC as its native gas asset, while Morpho and Aave supplied lending infrastructure alongside applications for trading and tokenized assets. Morpho had indicated before the Digital Asset-Backed Borrowing release that institutional Circle Mint customers would gain access to its Arc credit markets directly through Circle’s interface, and the protocol has separately proposed a $50,000 monthly incentive budget for Arc borrowing activity under its governance process.

cirBTC Reserves Verified Above Outstanding Supply

cirBTC serves as the collateral bridge connecting native Bitcoin with the Ethereum and Arc smart-contract environments. Circle first introduced the asset on Ethereum in June before bringing it to Arc on September 21. The launch on Ethereum introduced 1:1 Bitcoin backing alongside Chainlink Proof of Reserve, allowing market participants to inspect reserve information while native Bitcoin remains held separately from circulating wrapped tokens.

Current Circle data showed 948.7508 cirBTC outstanding against 951.2586 BTC in reserves at the time of verification. Arc accounted for 396.9919 cirBTC, while Ethereum carried 551.7590 cirBTC. The displayed reserve value stood at roughly $77.19 million. Circle states the underlying Bitcoin is held through its Bermuda affiliate and safeguarded by Circle National Trust in segregated accounts for cirBTC holders. Circle National Trust received final approval from the Office of the Comptroller of the Currency (OCC) in July to operate as a federally chartered national trust bank. The OCC charter permits the trust bank to provide regulated digital asset custody services; it does not accept deposits or make loans, and digital assets held there are not FDIC insured.

Circle affirms that cirBTC reserves are not lent, pledged, or rehypothecated. Chainlink Proof of Reserve publishes reserve information onchain, while Circle lists Bitcoin reserve addresses so counterparties can compare native BTC holdings with circulating cirBTC supply.

Regulatory Perimeter and Risk Disclosures

Circle’s legal documentation draws a clear line between the Circle Mint account and the DeFi borrowing position. Once collateral leaves Circle Mint for the Smart Wallet, Circle Internet Financial no longer holds those assets under the controls applying to balances kept inside Mint. Customers control the Smart Wallet through a two-of-two multiparty computation key-management system. Circle says it cannot independently initiate, reverse, or cancel blockchain transactions from the wallet. Borrowers remain responsible for monitoring their positions, maintaining collateral, and reviewing protocol risks.

Liquidations are controlled entirely by the selected lending protocol. Circle warns that falling collateral values, changing rates, oracle movements, or revised market parameters can trigger an automatic liquidation without prior notice, potentially resulting in penalties or collateral losses.

Why This Matters

The launch represents a significant step in bridging regulated institutional custody with decentralized finance credit markets. By enabling institutions to unlock dollar liquidity from Bitcoin holdings without selling the underlying asset, Circle addresses a core treasury management need for crypto-native firms and traditional financial institutions entering digital assets. The architecture—keeping native Bitcoin in an OCC-chartered trust while cirBTC circulates through audited smart contracts—offers a compliance-forward model that separates custodial risk from DeFi protocol risk.

Morpho’s immediate integration on Arc, just five days after the network’s public mainnet launch, demonstrates the velocity at which lending infrastructure can deploy on new chains when native gas assets (USDC) and wrapped collateral (cirBTC) are natively available. The forthcoming addition of Aave and other protocols would deepen liquidity and provide institutions with protocol choice, a key requirement for treasury diversification. Meanwhile, Circle’s expanding institutional USDC network—evidenced by BNY’s June launch of USDC minting, redemption, and custody and Standard Chartered’s July introduction of bank-led USDC access—signals a broader strategy to embed USDC into regulated financial plumbing while using DeFi as a complementary, opt-in yield and credit layer.

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