Circle Launches Digital Asset-Backed Borrowing for Institutions Using Bitcoin

Circle has launched a Digital Asset-Backed Borrowing (DABB) feature on its Circle Mint platform, enabling eligible institutions to unlock USDC liquidity by using Bitcoin as collateral. The feature went live on September 2, 2026, with Morpho as its first integrated lending market, functioning on both Ethereum and Circle's new EVM-compatible Layer 1 blockchain, Arc.

How the Borrowing Process Works

The DABB process involves three key steps:

• Institutions deposit Bitcoin (BTC) into Circle Mint.
• The BTC is converted into cirBTC, a tokenized version backed 1:1 by BTC held in custody at Circle National Trust.
• cirBTC serves as collateral in Morpho vaults, allowing institutions to receive a USDC loan directly in their Circle Mint account.

Upon repayment of the loan, the collateral is released, returning cirBTC and the underlying BTC to the borrower. This streamlined process allows institutions to avoid the complexities of managing custody and DeFi protocols independently.

Market Dynamics and Institutional Focus

Interest rates and collateral ratios are determined by Morpho’s market parameters, reflecting supply and demand dynamics. However, the service is not available to clients based in New York. On the launch day of Arc's mainnet, Morpho vaults backed by cirBTC attracted over $150 million in USDC and EURC deposits, indicating strong initial demand.

Significance of cirBTC and Future Plans

The introduction of cirBTC represents a significant shift for institutional Bitcoin holders, providing them with a means to access liquidity without selling their assets. Circle has indicated plans to expand its offerings to include additional protocols, with Aave as a potential future integration target. By launching cirBTC borrowing on both Ethereum and Arc, Circle is not only introducing a new product but also fostering activity on its newly established blockchain.