Circle Expands Bitcoin-Backed Borrowing with Aave Integration

Circle has expanded its Bitcoin-backed borrowing service, Digital Asset-Backed Borrowing (DABB), by adding Aave as a lending option alongside Morpho. The service, launched on September 21, 2026, allows institutional clients to borrow USDC against their Bitcoin holdings without parting with the asset.

The process involves depositing Bitcoin with Circle, which mints a token called cirBTC on a 1:1 basis. This token serves as collateral in on-chain lending markets, where clients can borrow USDC. Circle acts as a custodian, while lending rates and liquidity are managed by third-party protocols like Morpho and now Aave.

Initially, DABB operated exclusively on Morpho, driving significant early activity on Circle's Arc blockchain. By October 2, 2026, Morpho deposits on Arc surpassed $500 million, with cirBTC/USDC borrowing accounting for most of the activity. The liquidation threshold on Morpho is set at 86% loan-to-value.

The addition of Aave introduces competition, allowing borrowers and lenders to choose between two protocols. However, the service is currently unavailable to customers based in New York, limiting its reach to eligible institutions under Circle Mint LLC.