Circle expands institutional crypto borrowing with Bitcoin-backed USDC service

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Circle expands Bitcoin-backed USDC

Highlights

Circle launches Digital Asset-Backed Borrowing, letting institutions use Bitcoin-collateralized cirBTC to borrow USDC via Morpho on Arc and Ethereum.
Circle's lending service is overcollateralized, excludes New York clients, deposits USDC directly into Circle Mint, and does not require Circle to custody borrowed funds.
Circle expands institutional crypto lending just after launching the Arc mainnet, entering a market where BitGo, Lombard, and Anchorage Digital also offer crypto-backed borrowing solutions.

Bitcoin-collateralized borrowing launches on Arc and Ethereum

As reported by Cointelegraph, citing Circle, the new Digital Asset-Backed Borrowing service lets eligible institutional customers deposit Bitcoin, mint the wrapped token cirBTC and use it as collateral in supported third-party lending markets on Arc or Ethereum. Morpho is the first protocol supported, and Circle says it plans to add Aave and other lending venues as the service expands.

Borrowed USDC is deposited directly into a customer’s Circle Mint balance, while borrowing rates, collateral requirements and liquidation thresholds are determined by the outside lending market. Circle says the borrowing positions are overcollateralized, with collateral supplied through a customer-controlled wallet to third-party DeFi protocols rather than lent directly by Circle, and New York clients are excluded.

The rollout coincides with cirBTC going live on Arc on Monday. Circle launched cirBTC on Ethereum in June, and says the token is backed 1:1 by Bitcoin held in custody by Circle National Trust.

Institutional lending competition broadens

Both launches come days after Circle rolls out the Arc mainnet, its layer-1 blockchain focused on stablecoin payments and financial markets. Arc uses USDC as its native gas token and supports tokenized assets including BlackRock’s BUIDL and Circle’s USYC.

Circle’s move fits a broader industry effort to give institutions access to crypto-backed borrowing without forcing them to give up established custody arrangements. In February, Anchorage Digital partners with Kamino to let institutions borrow against staked Solana held at Anchorage Digital Bank, providing onchain liquidity without moving collateral out of qualified custody.

Bitcoin-backed structures also gain traction in March, when Lombard partners with Bitwise on a borrowing system tied to BTC held in custody, with Morpho providing lending infrastructure. Unlike Circle’s model, which converts deposited BTC into cirBTC for collateral use, Lombard’s system is designed to keep the underlying Bitcoin in custody without wrapping or bridging it.

BitGo also expands its institutional lending offering in March with a financing platform for borrowing and lending against liquid, staked and locked crypto assets held in custody. Its portfolio-based structure allows multiple assets to serve as collateral instead of requiring each loan to be backed by a separately posted position.

Our earlier report on Bitcoin’s rebound above $85,000 highlighted renewed optimism that the recent downturn in digital assets may be fading as fundamentals and institutional participation improve. We also noted how U.S. policy signals and ongoing SEC/CFTC actions can support near-term sentiment even when major legislation stalls, though the lack of durable congressional backing can still limit longer-term institutional confidence.

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