Bitwise Launches PAPY Vault on Circle's Arc for RWA Lending

Bitwise Asset Management has officially launched its Premium RWA Vault, known as PAPY, on Circle's Arc blockchain. This new vault, which went live on September 16, 2026, coincided with Arc's public mainnet launch and is currently leading the yield rankings among Morpho vaults, boasting a net annual percentage yield (APY) of 4.79%.

The PAPY-USDC vault operates on the Morpho lending protocol, utilizing its Vault V2 architecture. Users can deposit USDC, which the vault then lends out to borrowers who provide tokenized real-world assets (RWAs) as collateral. These loans are overcollateralized, requiring borrowers to lock up more value than they borrow, thus providing a safety cushion for lenders.

Accepted collateral includes Huma Finance’s PST and sUSDai, with potential allocations to cirBTC markets as well. Bitwise, acting as the curator, maintains a non-custodial approach, setting rules for collateral eligibility, loan-to-value ratios, and interest-rate models without directly holding depositors' funds.

As of early October 2026, the PAPY vault reported a net APY ranging from 4.8% to 5.55%, with a target variable APY of 5-6%. The vault currently holds between $418K and $422K in USDC, with a capacity limit of approximately $1 billion. Notably, the vault follows the ERC-4626 standard and imposes no lock-up requirements, allowing depositors to withdraw at their discretion, subject to available liquidity.

This launch follows Bitwise's earlier introduction of a PAPY-AUSD vault on Ethereum, which attracted over $20 million in deposits within two weeks. The Arc version is specifically designed around USDC from its inception, showcasing Bitwise's established presence in the market with $9 billion in client assets.

The expansion of the PAPY vault on Arc reinforces Morpho's role as a versatile infrastructure for curators across multiple networks, with Bitwise now operating PAPY on both Ethereum and Arc.