Circle Introduces Bitcoin-Backed USDC Borrowing via Morpho Protocol

Circle has unveiled a new borrowing service that enables eligible institutions to deposit Bitcoin, convert it into wrapped cirBTC collateral, and borrow USDC through the Morpho lending market. This service, which went live on September 21, aims to simplify the process for treasury teams seeking dollar liquidity without liquidating their Bitcoin holdings.

Under this Digital Asset-Backed Borrowing service, institutions can deposit native BTC, mint cirBTC, and use it as collateral through a customer-controlled wallet. The borrowed USDC is then credited to the customer's Circle Mint balance. While Circle coordinates the experience, the Morpho protocol governs the borrowing costs, collateral limits, and liquidation thresholds.

As of September 20, Circle's reserve dashboard indicated that there were approximately 948.75 cirBTC outstanding against 951.26 BTC in reserves. The Arc market, which is part of Circle's layer-1 network, reported an 86% liquidation loan-to-value limit with $14.13 million borrowed and $162.85 million in available liquidity. However, users must remain vigilant about monitoring collateral values and borrowing costs, as positions can become liquidatable even if the underlying Bitcoin is not sold.

This new service represents a significant step for Circle, enhancing the borrowing landscape while leaving market risks with the lending venue.