Circle has introduced a new borrowing product that allows institutional customers to access USDC against Bitcoin they already hold, without selling their BTC. The service, called Digital Asset-Backed Borrowing, is available to eligible Circle Mint clients, though customers based in New York are excluded.
Under the setup, a client deposits Bitcoin with Circle and receives cirBTC, the company’s wrapped bitcoin token backed one-to-one by the underlying BTC. That token can then be posted as collateral in a supported third-party lending market, with borrowed USDC credited back to the client’s Circle Mint balance.
How the borrowing flow works
The process is designed for institutions that want dollar liquidity while keeping their bitcoin exposure. After depositing BTC, the customer receives cirBTC and uses it through a wallet they control to enter a lending market supported by Circle’s service.
Once the collateral is posted, the institution can borrow USDC on an overcollateralized basis. When the loan is repaid, the collateral is released. Circle says the product brings together steps that previously required institutions to wrap bitcoin, move assets across platforms, and manage multiple interfaces before the proceeds could return to an institutional account.
Third-party markets set the loan terms
Circle is not setting a single fixed loan structure for the product. Instead, borrowing rates, collateral requirements, liquidation thresholds, and loan availability depend on the lending market the customer selects and may change over time.
At launch, the supported market is Morpho, with borrowing available through Morpho on Arc and Ethereum. Circle said additional protocols are expected to be added later, including Aave.
Role of Arc, Ethereum, and cirBTC
The service uses Ethereum as well as Circle’s Arc mainnet, which the company launched recently. Circle described the new borrowing product as a way to connect institutional Bitcoin holdings with onchain credit markets while keeping the operational flow inside its Mint framework.
Circle presents cirBTC as institutional-grade collateral. According to the company, the token is fully backed by the deposited BTC, with the underlying bitcoin held by Circle National Trust, a federally chartered trust bank and qualified custodian. Circle also said reserves are verifiable onchain.
What is confirmed now
For now, the confirmed rollout is limited to eligible Circle Mint institutions, with New York-based customers not able to use the service. The first supported borrowing venue is Morpho, and the economic terms of any loan remain determined by the outside market rather than by Circle itself.
The next confirmed expansion point is protocol support. Circle said it expects to add more lending venues over time, naming Aave as one example, but it has not provided a timetable in the available announcement.
Source: news.bitcoin.com