Circle Launches Bitcoin-Backed USDC Borrowing for Institutional Clients
Circle has rolled out a new lending product that lets institutional clients borrow USDC against their bitcoin holdings without having to sell the underlying asset. The service, called Digital Asset-Backed Borrowing, went live on September 21 for eligible institutional customers of Circle Mint, Circle’s platform for minting and redeeming its stablecoin.
The mechanics work through a wrapped-token structure. Verified clients deposit bitcoin and mint cirBTC, a token backed 1:1 by native BTC held in custody. That cirBTC is then supplied as collateral into a supported third-party lending market, and the resulting borrowed USDC is credited directly to the customer’s Circle Mint balance. Morpho is the first lending protocol supported at launch, with Circle saying it plans to add Aave and other markets over time. The service is available on the Ethereum and Arc blockchains — Arc being the stablecoin-focused Layer-1 network Circle launched the previous week — though it currently excludes New York-based users.
Circle announced the cirBTC side of this infrastructure directly on its own account, describing exactly the custody and verification model the new borrowing product now builds on:
Custody of the underlying bitcoin sits with Circle National Trust, a federally chartered national trust bank, maintaining a 1:1 backing ratio between cirBTC issued and BTC held. Circle has been explicit that it is not the lender in these transactions: borrowing rates, collateral requirements, and liquidation thresholds are all set by the independent third-party lending market rather than by Circle itself, and the company says it does not originate, underwrite, or fund the loans. That structure positions Circle as an infrastructure and custody layer connecting institutional bitcoin holders to onchain credit markets, rather than as a balance-sheet lender bearing the credit risk directly.
The product targets a specific pain point for institutional treasury desks: the ability to access dollar liquidity without triggering a taxable sale of appreciated bitcoin holdings or giving up potential future upside. It is the latest in a string of moves by major stablecoin issuers and crypto infrastructure firms to build lending rails around bitcoin as collateral, following similar collateral-based borrowing features launched elsewhere in the market this month. Positions opened through the service are overcollateralized, consistent with standard practice in onchain lending markets, meaning borrowers must post bitcoin collateral worth more than the USDC they draw down, with liquidation kicking in if that collateral value falls too close to the borrowed amount.
For now, the offering remains limited to verified institutional Circle Mint customers rather than retail users, reflecting Circle’s broader strategy of building products aimed at treasury departments, asset managers, and other large-scale holders who want to keep bitcoin exposure on their books while still tapping dollar liquidity when they need it.
Borrowing against cryptocurrency collateral carries liquidation risk if the value of that collateral declines, and this article is provided for informational purposes only, not as financial advice. Readers wanting to understand custody models like this one can start with coin680’s explainer on custodial versus non-custodial wallets in the Bitcoin Academy.