Circle Enables Bitcoin‑Backed USDC Borrowing via Morpho, Shifts Liquidation Risk to Lender

Circle has launched a streamlined workflow that allows qualified institutions to deposit native Bitcoin, mint the wrapped token cirBTC, and borrow USDC in a single process. The service, live on Circle’s Arc network and Ethereum as of September 21, routes the collateral to a Morpho lending market, where borrowing terms, collateral limits and liquidation thresholds are set by the market itself.

How the workflow operates

1. An institution deposits Bitcoin into its Circle Mint account.2. Circle mints cirBTC, a tokenized claim backed 1:1 by the deposited Bitcoin.3. The institution supplies cirBTC as collateral from a self‑controlled wallet to a Morpho market.4. USDC is borrowed and credited to the institution’s Circle Mint balance.

Risk and monitoring responsibilities

Although Circle coordinates the user experience, the Morpho market determines interest rates, available liquidity, collateral‑to‑loan ratios and liquidation LTV limits. Treasury teams must still track collateral values and utilization, as positions can become liquidatable without the underlying Bitcoin being sold.

Snapshot of the Arc market on launch day

• Liquidation LTV limit: 86%
• USDC borrowed: $14.13 million
• Available liquidity: $162.85 million
• Market size: $176.99 million
• Utilization: 7.98%

CirBTC supply and network distribution

Circle’s reserve dashboard showed 948.75081803 cirBTC outstanding against 951.25857454 BTC in reserves as of September 20. Approximately 397 cirBTC was allocated to the Arc market and about 552 cirBTC to Ethereum.

Eligibility and limitations

The service is limited to eligible institutions, excludes New York‑based clients, and is subject to jurisdictional and eligibility checks. Arc operates with a permissioned validator set, offering an additional layer of institutional control.

Outlook

The launch reduces the steps required for Bitcoin‑holding treasuries to obtain USDC liquidity, but it does not convert the variable DeFi credit exposure into a fixed‑rate Circle loan. Ongoing demand for cirBTC will depend on borrowing activity and market conditions after the initial snapshot.