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Circle plans to add Aave to Bitcoin-backed borrowing in Mint
The new lending venue extends Circle's Morpho-based service, but borrowers still face liquidation under third-party protocol rules
Circle has added Aave as a lending option inside its Bitcoin-backed borrowing service for Circle Mint clients, according to The Defiant. The move extends a product that has so far run on Morpho alone.
How the service works
Circle formally launched the product, called Digital Asset-Backed Borrowing (DABB), on September 21, 2026. It targets eligible institutional clients who want liquidity but don’t want to part with their Bitcoin.
The mechanics run in three steps. A client deposits native Bitcoin with Circle, which mints a token called cirBTC on a 1:1 basis. Each cirBTC is backed by Bitcoin held in reserve at Circle National Trust.
That token then serves as collateral in third-party on-chain lending markets. Against it, the client borrows USDC, Circle’s dollar stablecoin.
Circle is not the lender in this arrangement. Borrowing rates and available liquidity are set by the third-party protocols. Positions sit in smart wallets that customers control, and those positions follow each protocol’s own liquidation procedures.
The service is not available to everyone. Customers based in New York are excluded, which limits the pool to institutions eligible under Circle Mint LLC.
From Morpho-only to a second venue
DABB debuted with Morpho on Arc, Circle’s EVM-compatible Layer 1 blockchain. The product’s launch landed alongside the early operational rollout of Arc itself.
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Aave was part of the plan from the start, but it wasn’t ready on day one. As of early October 2026, the Aave integration was still not functional. Its arrival now gives Mint clients a second place to post cirBTC and borrow USDC.
The early numbers
Morpho’s cirBTC market gives a sense of initial appetite. Shortly after launch, market data showed nearly $18.86 million borrowed against a liquidity pool of $157.85 million.
The market set its liquidation loan-to-value threshold at 86%. Once a loan reaches 86% of the value of the Bitcoin backing it, the position becomes eligible for liquidation.
By October 2, 2026, Morpho deposits on Arc had surpassed $500 million. The cirBTC/USDC borrowing market accounted for a large majority of Morpho’s early activity on the chain.
What this means
Adding Aave matters for competition between lending protocols. Morpho had the cirBTC market to itself, and that market drove most of its early Arc activity. A second venue means borrowers and lenders can now split between two protocols.
Circle is effectively the custodian and token issuer, while the lending outcomes depend on code and rules it does not control. An 86% liquidation threshold on Morpho leaves limited room in a sharp drawdown, and borrowers using Aave will need to learn that protocol’s parameters separately.
The New York exclusion caps the near-term reach, as some of the largest US financial institutions are based there and cannot use the service in its current form.