Circle opens BTC-backed USDC loans; Morpho keeps liquidation risk

Circle activated a new service on Sept. 21 that lets eligible Mint clients deposit native Bitcoin, mint cirBTC and borrow USDC through Morpho lending markets on Arc and Ethereum. The service is available only to qualified institutional users and excludes clients in New York; access is subject to eligibility and jurisdictional requirements.

Under the workflow, customers deposit native BTC into Circle Mint, receive cirBTC as a tokenized claim on that Bitcoin, and supply cirBTC from a customer-controlled wallet into a Morpho lending market as collateral. Borrowed USDC is credited to the client’s Circle Mint balance.

Operational terms for each loan are set by Morpho. Each Morpho market pairs a loan asset and collateral and uses its own price oracle, interest-rate model and liquidation loan-to-value limit. Those parameters determine borrowing costs, available liquidity and the threshold at which a collateralized position can be liquidated.

Because cirBTC must be held inside the lending market to serve as collateral, a position can become subject to liquidation even though the underlying Bitcoin has not been sold on the market.

A snapshot of the Arc market on Sept. 21 showed an 86% liquidation loan-to-value limit, $14.13 million borrowed, $162.85 million in available liquidity, a $176.99 million market size and 7.98% utilization. Activity logs from that day recorded at least one borrow. Those figures applied only to the Arc market and may change as conditions shift.

Circle’s reserve data for Sept. 20 showed 948.75081803 cirBTC outstanding against 951.25857454 BTC held in reserves. About 397 cirBTC were on Arc and about 552 cirBTC were on Ethereum. Arc is Circle’s layer-1 network and operates with a permissioned validator set.

The coordinated workflow reduces the number of systems a treasury team must use to raise dollar liquidity without selling Bitcoin. Clients remain responsible for monitoring collateral values, market utilization and borrowing costs as set by the selected Morpho market. Demand for cirBTC will depend on ongoing borrowing activity and future Morpho market terms beyond the launch-day snapshot.