Circle launches Bitcoin-backed USDC borrowing for institutional clients

Circle has launched a Bitcoin-backed borrowing service for institutional clients that enables eligible Circle Mint users to borrow USDC by supplying Bitcoin collateral to onchain lending markets. Customers deposit BTC, mint Circle’s wrapped Bitcoin token cirBTC, and then supply cirBTC as collateral to supported third-party DeFi lending protocols. Morpho is the first protocol supported; Circle said it plans to add Aave and other markets over time.

According to Circle, USDC borrowed through the service is credited directly to the borrower’s Circle Mint balance. Key loan parameters such as borrowing rates, collateral requirements and liquidation thresholds are determined by the third-party lending markets rather than by Circle. Circle also said borrowing positions are overcollateralized and that collateral is supplied from a customer-controlled wallet to the external protocols, rather than being lent directly by Circle.

The rollout coincides with cirBTC becoming available on Arc, Circle’s newly launched layer-1 blockchain, following an earlier cirBTC launch on Ethereum in June. Circle states cirBTC is backed 1:1 by Bitcoin held in custody by Circle National Trust. Circle excluded New York clients from the borrowing offering.

Circle’s move follows other institutional-focused crypto lending developments this year. In February Anchorage Digital and Kamino enabled borrowing against staked Solana held at Anchorage Digital Bank. In March, Lombard and Bitwise worked on a BTC-backed borrowing model with Morpho infrastructure that keeps underlying BTC in custody without wrapping, and BitGo expanded its institutional financing platform for loans against assets held in custody with a portfolio-based collateral approach.