Circle has launched a service allowing eligible institutional customers to borrow USDC against their bitcoin holdings, in its latest effort to attract companies seeking liquidity without selling their cryptocurrency.
The product, called Digital Asset-Backed Borrowing, or DABB, became available on Monday to eligible Circle Mint customers. Institutions based in New York are not eligible to use the service, Circle said.
Customers deposit bitcoin and receive Circle-wrapped bitcoin, known as cirBTC. Circle says the token is backed on a one-to-one basis by the underlying bitcoin.
The cirBTC is then supplied as collateral to a third-party lending market through a wallet controlled by the customer. In return, the borrower receives USDC, the dollar-pegged stablecoin issued by Circle, in its Circle Mint balance. Once the loan is repaid, the collateral is released.
Circle said DABB brings together a process that has traditionally involved several separate and complicated steps. Bitcoin is not natively compatible with the smart contracts used by on-chain lending services on Ethereum and other networks. As a result, borrowers have typically needed to select a wrapped version of bitcoin, transfer assets between platforms and use protocol interfaces before returning funds to an institutional account.
The loans are overcollateralised, meaning customers must provide collateral worth more than the amount they borrow. Circle said access is based on the value of the collateral and the rules of the selected market, rather than conventional credit assessments.
Customers can add more collateral or repay the borrowing according to their own schedule. However, interest rates, collateral requirements, liquidation thresholds and the availability of loans are determined by the lending market chosen by each customer and may change.
Liquidation thresholds generally establish the point at which a position can be forcibly closed if the value of the collateral falls.
Morpho is the only lending protocol available through DABB at launch. Circle said it expects to support additional protocols, including Aave, in the future.
The service is available through Ethereum and Circle’s own Arc blockchain, whose mainnet launched just last week.
Circle also described cirBTC as institutional-grade collateral. The bitcoin backing the token is held by Circle National Trust, a federally chartered trust bank and qualified custodian. Circle said the reserves can be verified on-chain.
The company also argued that cirBTC is “strategically neutral” because Circle does not operate an exchange or lending protocol that competes with the third-party markets used for the service.
