Circle Drops Bitcoin-Backed Borrowing Service — Apparently Your $BTC Can Finally Pull Its Weight 💰

Circle has launched a Bitcoin-backed borrowing service for institutional clients, enabling eligible Circle Mint customers to use $BTC as collateral to borrow USDC through onchain lending markets. The offering, called Digital Asset-Backed Borrowing, allows customers to deposit Bitcoin, mint Circle's wrapped Bitcoin token cirBTC and supply it as collateral to supported third-party lending protocols on Arc or Ethereum. Morpho is the first lending protocol supported, with Circle planning to add Aave and additional protocols in the future.

The service debuts alongside cirBTC going live on Arc on Monday. Borrowed USDC is deposited directly into the customer's Circle Mint balance, while borrowing rates, collateral requirements and liquidation thresholds are set by the third-party lending market. Positions are overcollateralized, with collateral supplied through a customer-controlled wallet to third-party DeFi protocols rather than lent directly by Circle. New York clients are excluded from the offering.

Circle previously launched cirBTC on $ETH in June. The token is backed 1:1 by Bitcoin held in custody by Circle National Trust. Both launches follow the rollout of the Arc mainnet, Circle's layer-1 blockchain targeting 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.

The launch extends a broader institutional push toward crypto-backed borrowing within qualified custody. In February, Anchorage Digital partnered with Kamino to let institutions borrow against staked $SOL held at Anchorage Digital Bank, giving borrowers access to onchain liquidity without moving collateral out of qualified custody. Bitcoin-backed models followed in March, when Lombard partnered with Bitwise to develop a system for borrowing against $BTC held in custody, with Morpho providing the lending infrastructure.

Unlike Circle's model, which converts deposited $BTC into cirBTC for use as collateral, Lombard's system was designed to keep the underlying Bitcoin in custody without wrapping or bridging it. BitGo also expanded its institutional lending offering in March, launching a financing platform for borrowing and lending against liquid, staked and locked crypto assets held in custody, using a portfolio-based model that allows multiple assets to serve as collateral rather than requiring collateral to be posted for individual loans.