Circle has introduced Digital Asset-Backed Borrowing for eligible Circle Mint customers, allowing institutions to use Bitcoin as collateral for USDC loans without selling their BTC. The new workflow converts deposited BTC into cirBTC and routes that tokenized collateral into third-party lending markets on Arc or Ethereum. Borrowed USDC is then transferred directly back into the customer’s Circle Mint balance, creating a coordinated path between Bitcoin custody, on-chain collateral and dollar liquidity.
According to Circle’s official product announcement, customers first deposit BTC and mint Circle Wrapped Bitcoin, or cirBTC, before selecting a supported lending market through a user-controlled Smart Wallet. Circle provides the interface and asset infrastructure, while the actual loan originates through an external DeFi protocol. The positions are open-ended and overcollateralized rather than based on traditional unsecured credit underwriting.
Morpho Provides the Initial Lending Markets
Morpho confirmed that it is the first supported lending protocol for the service. Customers can currently collateralize cirBTC to borrow USDC through supported Morpho markets on Arc and Ethereum. Interest rates, loan-to-value parameters, liquidation thresholds and available liquidity are determined by the underlying lending market rather than Circle, meaning borrowing conditions can change as utilization and market parameters move.
Digital Asset-Backed Borrow in @circle Mint, powered by Morpho
Circle Mint customers can now deposit BTC & mint cirBTC, collateralize cirBTC, and borrow USDC on @arc or @ethereum, all in an integrated flow on the same platform they already use and trust. pic.twitter.com/nQgciaFHkp
— Morpho 🦋 (@Morpho) September 21, 2026
Early activity on Arc accelerated around the launch. Approximately $14.3 million in USDC were borrowed against 287 cirBTC, up from $1.37 million on September 17. That increase demonstrates rapid initial utilization of the Arc market, but it remains a point-in-time reading rather than evidence of sustained borrowing demand. Morpho’s on-chain markets continue updating as users supply liquidity, borrow, repay and adjust collateral.
cirBTC itself is backed 1:1 by native BTC, with the underlying reserves held through Circle’s Bermuda affiliate and safeguarded by Circle National Trust. Circle also publishes reserve information on-chain through Chainlink Proof of Reserve. The wrapped asset allows native Bitcoin value to enter smart-contract lending markets while the corresponding BTC remains segregated in custody. cirBTC first launched on Ethereum in June before expanding to Arc following the network’s September mainnet launch.
Repayment Releases Collateral, Not Automatically BTC
The repayment flow contains an important additional step. Repaying borrowed USDC releases the cirBTC posted as collateral, but recovering native BTC requires the customer to subsequently redeem the released cirBTC through Circle Mint. Circle supports 1:1 cirBTC redemption for BTC, subject to account limits, eligibility and compliance review. The distinction separates settlement of the Morpho debt from redemption of the wrapped asset itself.
Circle says additional lending integrations will follow, explicitly naming Aave as a future supported protocol. The launch also expands Arc’s financial infrastructure shortly after other DeFi deployments, including Curve’s stablecoin-focused integration with the network. Broader protocol support could give institutional customers more choices for deploying cirBTC collateral, but each venue will introduce its own liquidity, smart-contract and liquidation risks.
Access remains limited to eligible institutional Circle Mint customers and excludes New York clients. The next meaningful indicators will be sustained borrowing balances, collateral utilization and expansion beyond Morpho, rather than the initial growth of a single Arc market. Circle’s product has established a working institutional path from BTC custody to USDC borrowing, but the economics of that borrowing will continue to depend on third-party DeFi markets rather than terms guaranteed by Circle.