Circle has made available a new service for eligible institutions to borrow USDC against Bitcoin collateral through Morpho lending markets. The service went live on Circle's Arc network and Ethereum on September 21.
Under the Digital Asset-Backed Borrowing service, customers deposit native Bitcoin, convert it to cirBTC collateral through Circle Mint, and supply it through a customer-controlled wallet to borrow USDC. The borrowed stablecoins settle directly into the customer's Circle Mint balance.
The workflow reduces operational complexity by combining deposit, collateralization, and borrowing steps into a single coordinated process. However, Circle coordinates only the interface; Morpho lending markets determine borrowing costs, collateral limits, liquidation thresholds, liquidity availability, and interest rates.
Market conditions at launch: A September 21 snapshot of the Arc market for USDC loans against cirBTC showed an 86% liquidation loan-to-value limit, with $14.13 million borrowed, $162.85 million available liquidity, and 7.98% utilization.
The service remains limited to eligible institutions and excludes New York-based clients. It is subject to jurisdiction and eligibility requirements. Arc operates under a permissioned validator set, distinguishing it from the Ethereum deployment option.
Treasury teams using the service must still monitor collateral values, utilization rates, and borrowing costs. Positions can become liquidatable even though the underlying Bitcoin remains held, since cirBTC sits in the lending market as collateral.
As of September 20, Circle reported 948.75 cirBTC outstanding against 951.26 BTC in reserves, with approximately 397 cirBTC on Arc and 552 on Ethereum. Sustained demand for the service will depend on continued borrowing activity and market terms beyond the launch snapshot.
