Circle launches Bitcoin-backed USDC borrowing via Morpho

Circle has launched Digital Asset-Backed Borrowing, allowing eligible institutional Circle Mint customers to deposit Bitcoin, mint 1:1 backed cirBTC, and borrow USDC. The service operates on the Arc and Ethereum networks, utilizing Morpho as its initial lending protocol. While Circle provides the Smart Wallet interface, all credit terms, interest rates, and liquidation risks are managed by third-party DeFi protocols. New York clients and retail users remain excluded from the service.

Circle Bitcoin-backed USDC borrowing

• ▪The Digital Asset-Backed Borrowing service is available to eligible institutional customers on the Arc and Ethereum networks
• ▪Circle launched Digital Asset-Backed Borrowing on September 21, 2026, allowing eligible Circle Mint institutional customers to deposit Bitcoin, mint cirBTC, and borrow USDC

cirBTC tokenization reserve backing

• ▪Chainlink Proof of Reserve publishes onchain reserve information for cirBTC, allowing public verification of the underlying Bitcoin holdings
• ▪Circle Wrapped Bitcoin, branded as cirBTC, launched on the Arc network on September 21, 2026, five days after Arc's public mainnet launch
• ▪The underlying Bitcoin backing cirBTC is held through Circle's Bermuda affiliate and safeguarded in segregated accounts by Circle National Trust
• ▪Circle Wrapped Bitcoin is backed 1:1 by physical Bitcoin, with reserves of 951.2586 BTC exceeding the outstanding supply of 948.7508 cirBTC as of September 20, 2026

Morpho lending protocol integration

• ▪Morpho is the first supported lending protocol for Circle's Digital Asset-Backed Borrowing service, with Aave expected to integrate Digital Asset-Backed Borrowing later
• ▪The cirBTC-USDC market on Morpho's Arc platform operated with an 86% liquidation loan-to-value threshold and outstanding borrowing between $14.13 million and $18.86 million
• ▪Galaxy and Keyrock supply nearly all of the borrowed dollars in Morpho's cirBTC lending market on Arc, which held $14.3 million of USDC borrowed against 287 cirBTC

Institutional eligibility regulatory restrictions

• ▪Circle Mint customers located in New York are excluded from using Circle's Digital Asset-Backed Borrowing product
• ▪Circle International Bermuda Limited issues cirBTC under the regulation of the Bermuda Monetary Authority
• ▪Digital Asset-Backed Borrowing is restricted to institutional Circle Mint customers, and individual retail users cannot open standard Mint accounts

Smart Wallet workflow mechanics

• ▪Circle's Smart Wallet, used in Digital Asset-Backed Borrowing, is controlled by customers via a two-of-two multiparty computation key-management system, preventing Circle from unilaterally initiating or reversing transactions
• ▪Circle's Digital Asset-Backed Borrowing workflow routes deposited Bitcoin to mint cirBTC, which is transferred to a user-controlled Smart Wallet to be posted as collateral
• ▪Borrowed USDC is automatically routed from the customer's Circle Smart Wallet directly into their regulated Circle Mint balance

Third-party liquidation risk allocation

• ▪Lending terms, interest rates, collateral limits, and liquidations are determined and executed entirely by third-party DeFi protocols such as Morpho rather than Circle
• ▪Circle Technology Services supplies the Digital Asset-Backed Borrowing interface and Smart Wallet technology, while Circle does not provide the underlying credit for Digital Asset-Backed Borrowing

Debatable claims

• ▪Circle should keep institutional borrowing collateral within its regulated custody environment
• ▪Circle should expand its Bitcoin-backed borrowing service to retail users