Stablecoin issuer 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 markets on Arc or Ethereum. Morpho is the first lending protocol supported, with Circle planning to add Aave and other protocols. The rollout coincides with cirBTC going live on Arc on Monday. Circle detailed the service in an official blog post and shared the news on X.

According to Circle, 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. The borrowing 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, a geographic limit on the rollout as it currently stands. For eligible institutions, the structure offers a route to borrow against Bitcoin without selling it, though the credit terms they face are set by the lending market rather than by Circle.

Circle previously launched cirBTC on Ethereum in June. The token is backed 1:1 by Bitcoin held in custody by Circle National Trust — meaning Circle sits at several points in the same transaction: custodian of the reserve Bitcoin, issuer of the cirBTC wrapper, and issuer of the USDC being borrowed.

Both launches come days after Circle rolled out the Arc mainnet, its 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.

Institutional crypto lending expands

Circle's launch follows a broader push to give institutional investors access to crypto-backed borrowing while keeping collateral within established custody arrangements. It also brings a stablecoin issuer into a landscape so far populated by crypto custodians and lending platforms.

In February, Anchorage Digital partnered with Kamino to allow institutions to borrow against staked Solana (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. Its portfolio-based model allows multiple assets to serve as collateral rather than requiring collateral to be posted for individual loans. With Circle planning to add Aave and other protocols, and custody-based models already in place, how institutional crypto-backed credit takes shape is an area to watch.