Circle Launches Bitcoin-Backed USDC Borrowing With Liquidation Risk on Morpho

The Mint workflow cuts down on operational steps, while variable market terms and liquidation risks remain with the third-party lender.

Eligible Circle Mint institutions can now deposit Bitcoin, convert it into wrapped cirBTC collateral, and borrow USDC through a Morpho lending market in a single coordinated workflow.

Circle launched the service on Arc and Ethereum on Sept. 21, cutting down the number of systems treasury teams need to manage when raising dollar liquidity without selling their Bitcoin.

The service is available only to eligible institutions, excludes clients in New York, and remains subject to jurisdictional and eligibility requirements. Circle Mint serves as the account interface, cirBTC is Circle’s tokenized claim backed by native Bitcoin, while Morpho provides the third-party lending market.

Under Circle’s Digital Asset-Backed Borrowing service, customers deposit native BTC, mint cirBTC, and provide the token as collateral through a wallet they control. The borrowed USDC is then credited to the customer’s Circle Mint balance.

Circle manages the overall experience, while the selected market sets borrowing costs, collateral limits, liquidation thresholds, available liquidity, and access. Morpho’s documentation explains that each market combines a loan asset, collateral asset, oracle, interest-rate model, and liquidation loan-to-value limit.

For treasury teams, the streamlined interface does not eliminate the need to track collateral values, utilization, and borrowing costs. A position can still become liquidatable even when the underlying Bitcoin remains unsold, because cirBTC is held in the lending market.

A Sept. 21 snapshot of the Arc market for USDC loans backed by cirBTC showed an 86% liquidation loan-to-value limit. The market had $14.13 million in outstanding loans, $162.85 million in available liquidity, a $176.99 million total size, and 7.98% utilization. The activity log also recorded at least one borrow that day.

The figures indicate that the Arc market was active, but they represent only a point-in-time snapshot and should not be applied to the Ethereum market.

Circle’s reserve dashboard showed 948.75081803 cirBTC outstanding against 951.25857454 BTC in reserves as of Sept. 20. Roughly 397 cirBTC was held on Arc, while about 552 was held on Ethereum.

Arc, Circle’s layer-1 network, operates with a permissioned validator set, creating another distinction for institutions evaluating the supported networks.

The launch streamlines the route from held Bitcoin to USDC, but it does not convert variable DeFi credit into a fixed Circle loan. Sustained cirBTC demand will depend on ongoing borrowing activity and market conditions beyond the launch-day snapshot.