Circle’s BTC-Backed USDC Borrowing Already Tops $18M in Loans on Morpho

Circle has switched on a new way for big crypto players to unlock cash from their Bitcoin holdings without selling a single coin. The USDC issuer confirmed on September 21, 2026, that qualified institutional clients using Circle Mint can now access BTC-backed USDC borrowing through a service called Digital Asset-Backed Borrowing, or DABB, which routes loans through third-party lending markets built on Arc and Ethereum.

Key takeaways

• Circle launched Digital Asset-Backed Borrowing on Circle Mint on September 21, 2026, letting eligible institutions borrow USDC against Bitcoin without liquidating it.
• Customers deposit BTC, mint cirBTC, and use it as collateral in supported lending markets to borrow USDC credited straight to their Circle Mint balance.
• Morpho is the first lending protocol supporting the service, with Aave expected to join later; the workflow runs on Arc and Ethereum.
• Interest rates, collateral limits, and liquidation thresholds are set by the chosen lending market, not by Circle, and positions remain overcollateralized.
• The launch follows Arc Mainnet’s September 16 debut and comes alongside Circle’s Tazapay acquisition and its Chelsea Football Club sponsorship deal.

Circle Launches BTC-Backed USDC Borrowing Service

Circle’s new lending tool lets institutions treat Bitcoin as a source of liquidity instead of an asset they have to sell to raise cash. The service is aimed squarely at qualified institutional clients already operating on Circle Mint, and it lets them borrow USDC while keeping their BTC exposure intact.

Simplifying BTC Collateralized Lending

Circle has framed DABB as a way to collapse several separate steps into a single workflow. Native Bitcoin can’t interact directly with smart contracts, so putting BTC to work in on-chain lending has traditionally meant wrapping the asset, shuttling it between platforms, and manually settling funds back into an institutional account. According to Circle, DABB folds those steps into one coordinated process handled through Circle Mint.

Loan Structure and Repayment Process

The mechanics are straightforward on paper. A customer deposits BTC and mints cirBTC, Circle’s wrapped Bitcoin token. That cirBTC then moves into a user-controlled Smart Wallet, gets posted as collateral on a supported lending protocol, and is used to borrow USDC. The borrowed stablecoin lands automatically in the customer’s Circle Mint balance. To unwind the position, the customer sends USDC back through the same interface, and collateral is released as the debt gets repaid.

Circle has been clear that it doesn’t set the price of these loans. The company said positions are overcollateralized, but interest rates, collateral requirements, liquidation thresholds, and available liquidity are all determined by the lending market a customer chooses — and those terms can shift over time. In practice, that means two institutions borrowing against the same amount of cirBTC could face very different costs depending on which protocol they pick, rather than a single fixed Circle borrowing rate.

Circle’s own legal documentation draws a firm line here: once collateral leaves Circle Mint for the Smart Wallet, it’s no longer covered by the protections that apply to funds sitting inside the regulated Mint environment. Borrowing, collateral management, and liquidation all happen through third-party DeFi protocols and their smart contracts, with customers controlling the Smart Wallet through a two-of-two multiparty computation key system. Circle says it cannot unilaterally initiate, reverse, or cancel transactions from that wallet, which puts monitoring and risk management largely in the borrower’s hands. New York-based customers are excluded from the borrowing product.

Integration with Arc and Ethereum Networks

Circle built the borrowing service to run across two networks — Arc and Ethereum — giving institutions a choice of infrastructure depending on where their liquidity and lending relationships already sit. This dual-network approach is central to why the launch matters: it stitches BTC-backed USDC borrowing directly into Circle’s broader stablecoin ecosystem rather than treating it as a standalone feature.

Arc Mainnet Launch and Its Role

The timing lines up with Circle’s own network ambitions. Arc Mainnet went live on September 16, 2026, launching with more than 100 institutional and ecosystem builders and designed to handle payments, foreign exchange, trading, lending, and other financial-market activity. USDC covers transaction fees on Arc, and the network is built for sub-second finality.

Circle has positioned Arc as infrastructure purpose-built for stablecoin finance, bringing cirBTC and USDC together in one environment, while Ethereum offers access to lending markets that are already deep and established. cirBTC itself isn’t new to Ethereum — Circle introduced the token there in June with 1:1 Bitcoin backing and Chainlink Proof of Reserve verification, before extending it to Arc on September 21. At the time of verification, Circle’s public reserve data showed 948.7508 cirBTC outstanding against 951.2586 BTC held in reserve, split between 396.9919 cirBTC on Arc and 551.7590 cirBTC on Ethereum, with the underlying Bitcoin custodied through Circle’s Bermuda affiliate and safeguarded by Circle National Trust, which received OCC approval in July to operate as a federally chartered national trust bank.

Morpho as First Lending Partner

Morpho is the protocol carrying the first live volume for this rollout. On Arc, Morpho currently runs a USDC lending market that uses cirBTC as collateral, with an 86% liquidation loan-to-value threshold. Data checked shortly after launch showed roughly $18.86 million already borrowed against $157.85 million in available liquidity, putting total market size near $176.71 million and utilization at about 10.67%. Circle has said support for additional protocols, including Aave, will follow as the product develops, though no timeline has been set for that expansion.

For institutions already active on Morpho, Circle Mint effectively becomes a shortcut: open a cirBTC position, borrow USDC, and settle the debt back into a Mint balance without juggling multiple platforms. That convenience is the core pitch behind BTC-backed USDC borrowing — it turns what used to be a multi-platform chore into something closer to a single transaction, even though the underlying credit risk still sits with whichever DeFi protocol is doing the lending.

Broader Institutional Expansion and Related Developments

DABB is landing in the middle of a busier stretch for Circle’s institutional business, and the timing suggests the company is building out several pieces of infrastructure at once rather than treating this as an isolated product drop. Circle disclosed on September 8 that it had agreed to acquire Tazapay, a Singapore-based B2B cross-border payments company operating in more than 100 markets. Tazapay reported over $25 billion in annualized payment volume, with more than 60% of that flowing through stablecoins as of July 31, 2026. That deal is expected to close in 2027, subject to regulatory approval.

Separately, Circle’s brand has also been showing up outside strictly financial channels: an August 28 partnership puts Circle and USDC branding on Chelsea Football Club’s men’s and women’s academy teams for the 2026/27 season. Those moves sit apart from the lending business, but together with Arc’s launch and the new borrowing service, they point to a company pushing USDC deeper into payments, sports sponsorship, and now on-chain credit markets all at once.

What ties the borrowing launch specifically to the rest of Circle’s roadmap is the Arc connection. Circle has been steadily building regulated on-ramps for institutions to mint and redeem USDC — including arrangements with major banks earlier in the year — and DABB extends that same institutional focus into collateralized lending. Whether Aave’s eventual integration or new blockchain deployments broaden the service further is something Circle hasn’t put a date on yet.

FAQ

Who is eligible to use Circle’s BTC-backed USDC borrowing service?

The service is available to qualified institutional clients on Circle Mint, not individual retail users. Circle has also confirmed that customers based in New York are excluded from the borrowing product.

How does the borrowing process work on Circle Mint?

Clients deposit BTC and mint cirBTC, a wrapped version of Bitcoin. They move cirBTC into a Smart Wallet, post it as collateral on a supported third-party lending market, and borrow USDC, which is credited automatically to their Circle Mint balance. Repaying that USDC releases the collateral.

Which blockchain networks support the new borrowing service?

The service operates on Circle’s Arc network, which launched on September 16, 2026, and on Ethereum, with third-party lending markets integrated on both.

Does Circle set fixed interest rates for the borrowing service?

No. Loan terms — including interest rates, collateral requirements, liquidation thresholds, and available liquidity — are set by whichever lending market a customer selects, such as Morpho, rather than by Circle itself.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.