Circle's New Service Lets Institutions Borrow USDC Against Bitcoin Through Morpho
Circle has introduced a new service that allows eligible institutions to borrow USDC against their Bitcoin holdings, but it's not a straightforward process. The company is partnering with Morpho, which handles the lending market and determines the borrowing costs, collateral limits, and liquidation thresholds.
The service is available on Arc and Ethereum, and it streamlines the process of converting Bitcoin into dollars by reducing the number of screens that treasury desks need to navigate. However, this convenience comes with a caveat: Circle operates the front door while Morpho dictates the terms behind it.
The lending market itself is where the decisions that matter are made, and every market is its own distinct combination of loan asset, collateral, oracle, interest-rate model, and liquidation loan-to-value limit. This means that even though the cirBTC sits inside the lending market, a position can become liquidatable even if the underlying Bitcoin was never sold.
A snapshot of the Arc market on September 21 showed a liquidation loan-to-value limit of 86%, with $14.13 million in borrows against $162.85 million of available liquidity. The activity log recorded at least one borrow that day, indicating that the market was actually in use rather than merely listed.