The Circle has started allowing eligible institutional clients to use Bitcoin as collateral to take out USDC loans without selling their BTC. The feature, called Digital Asset-Backed Borrowing, was launched on Monday (21) within Circle Mint and debuts with markets from the protocol Morpho on the Arc and Ethereum networks.
In the operation, the client deposits Bitcoin and receives cirBTC, a tokenized version of the asset issued by Circle and backed 1:1 in BTC. The cirBTC is then sent to a wallet controlled by the client and used as collateral in the selected credit market. The USDC obtained in the loan is transferred directly to the Circle Mint balance.
The structure allows companies to obtain dollar-denominated liquidity while maintaining exposure to Bitcoin. The loans are overcollateralized, that is, the value of the collateral must exceed the amount borrowed, instead of relying on a traditional unsecured credit analysis.
Morpho defines rates and liquidation risk
Although the experience is integrated into Circle Mint, Circle does not set the terms of the loans. Interest rates, collateral requirements, liquidation limits, availability and liquidity are determined by the third-party market used and may vary over time. A drop in Bitcoin can therefore lead to liquidation of the position if the minimum parameters are no longer met.
Morpho is the first protocol approved for the offering. Circle said it intends to add other markets as the product evolves, including Aave. The service is initially available on Arc, the company's own blockchain, and Ethereum.
According to the company, each cirBTC is backed by native Bitcoin held by Circle National Trust, a fiduciary institution with a federal charter in the United States, and the reserves can be verified on-chain. The product is restricted to eligible institutional clients of Circle Mint and, at this time, is not available to clients in New York.
Circle shares also advanced on the day of the announcement, amid a broader rally in the cryptocurrency market. The stock opened the session about 7% above the previous close, but lost part of the move during the trading session and ended Monday with a gain of approximately 2.4%, at US$ 93.99.
