Circle has added Digital Asset-Backed Borrowing, or DABB, for eligible institutional Circle Mint clients, allowing them to access USDC liquidity by using bitcoin as collateral rather than selling it. At launch, the service supports Morpho lending markets on the Arc and Ethereum networks.

Through a single workflow, a client sends bitcoin to Circle and mints an equivalent amount of cirBTC. The client can then post the token as collateral on a supported third-party lending market through a client-controlled wallet.

Borrowed USDC is credited directly to the client’s Circle Mint balance. To close the position, the client repays the borrowed USDC, after which the cirBTC collateral is released.

Circle said the positions are overcollateralized. Access depends on collateral parameters and the selected lending market rather than a traditional borrower-underwriting process.

Terms also vary by market. Interest rates, collateral requirements, liquidation thresholds, liquidity levels and availability may change.

cirBTC is backed 1:1 by bitcoin

Circle uses cirBTC, a tokenized form of bitcoin, as the collateral asset for DABB. According to the company, each cirBTC token is backed 1:1 by native bitcoin, and the reserves can be verified onchain.

The underlying bitcoin is held through Circle National Trust, which Circle identifies as a federally licensed trust bank and qualified custodian.

Circle said cirBTC is intended to be neutral with respect to other market participants. The company does not operate a centralized or decentralized exchange or a lending protocol, and it designed the token for use across different venues and institutional workflows.

Combined with USDC and Circle Mint, cirBTC provides a workflow spanning bitcoin custody, tokenized collateral and access to dollar liquidity.

DABB launches on Arc and Ethereum

DABB initially operates on Arc and Ethereum. Arc is Circle’s blockchain infrastructure for stablecoin-based financial transactions, while Ethereum provides access to established onchain lending markets.

Morpho was the first third-party lending protocol supported by DABB. Circle plans to add other venues, including Aave, as the product evolves.

The company said support for cirBTC and DABB could later expand to other networks alongside the development of Circle’s cross-chain infrastructure.

Circle previously launched the Arc mainnet, with BlackRock, Visa and Mastercard among its validators.

Source: Incrypted