Bitwise Expands PAPY Vault to Circle’s Arc with USDC-Based RWA Lending

Bitwise Asset Management has expanded its PAPY vault to Circle’s Arc blockchain, marking a significant move in the realm of USDC-based real-world asset (RWA) lending. The vault, now live on Arc since September 16, 2026, has quickly risen to the top of yield rankings among Morpho vaults, offering a net APY of 4.79%. The PAPY-USDC vault operates on Morpho’s lending protocol using its Vault V2 architecture, enabling users to deposit USDC, which is then lent to borrowers collateralized by tokenized RWAs.

The collateral accepted includes Huma Finance’s PST and sUSDai, with potential future allocations to cirBTC markets. Bitwise acts as the curator but remains non-custodial, setting the rules for collateral qualification, loan-to-value ratios, and interest-rate models. As of early October 2026, the vault reported a net APY ranging from 4.8% to 5.55%, with Bitwise charging a management fee of approximately 0.39-0.4% and no performance fee.

Despite the modest deposits of around $418K to $422K in early October 2026, the vault’s capacity is capped at roughly $1B. The PAPY-USDC vault follows the ERC-4626 standard and has no lock-up requirements, allowing depositors to withdraw anytime, subject to available liquidity. This expansion follows the successful launch of a PAPY-AUSD vault on Ethereum on September 2, 2026, which attracted over $20 million in deposits within two weeks.

The move reinforces Morpho’s role as a versatile infrastructure for curators across multiple networks, with Bitwise now operating PAPY on both Ethereum and Arc. However, the vault’s yields have been variable, and the safety of the assets depends on the stability and liquidity of the collateralized RWAs.