Circle Adds Aave as Second Lending Option for Bitcoin-Backed Borrowing Service

Circle has integrated Aave as a second lending protocol within its Digital Asset-Backed Borrowing (DABB) service, enabling institutional clients to borrow USDC against Bitcoin collateral. This expansion, which became operational in early October 2026, offers clients using Circle Mint more options for leveraging their digital assets.

The DABB service, formally launched on September 21, 2026, allows eligible institutional clients to obtain liquidity without selling their Bitcoin. The process involves clients depositing Bitcoin with Circle, which mints an equivalent amount of cirBTC on a 1:1 basis. This cirBTC is backed by Bitcoin reserves held at Circle National Trust and functions as collateral for borrowing USDC, Circle’s dollar stablecoin.

Initially, the DABB service operated exclusively with the Morpho protocol. The integration of Aave was planned from the outset but was not functional at the service’s launch. With Aave now live, clients have a choice between two distinct lending protocols for their cirBTC collateral.

Circle serves as the custodian and token issuer, but the borrowing rates, liquidity, and liquidation procedures are governed by the third-party protocols, Aave and Morpho. Customer positions are managed within smart wallets they control, adhering to each protocol’s specific rules.

Early activity in the DABB service, when it utilized only Morpho, demonstrated significant engagement. Shortly after launch, Morpho’s cirBTC market saw approximately $18.86 million borrowed against a liquidity pool of $157.85 million. The liquidation loan-to-value threshold on Morpho was set at 86%. By October 2, 2026, Morpho deposits on Arc, Circle’s EVM-compatible Layer 1 blockchain, had surpassed $500 million, with the cirBTC/USDC borrowing market accounting for a substantial portion of this activity.

The addition of Aave introduces a new competitive dynamic to the DABB service. It allows borrowers and lenders to split their activity between two protocols, potentially fostering competition and enabling diversified strategies. However, borrowers engaging with Aave will need to familiarize themselves with that protocol’s specific parameters and liquidation thresholds, which may differ from those on Morpho.

The service has limitations, notably excluding customers based in New York. This restriction impacts the potential reach of the service, particularly for major US financial institutions located in that region.

Details regarding the specific parameters and liquidation thresholds for Aave’s cirBTC/USDC market are yet to be fully disclosed. The exact date beyond ‘early October 2026’ when the Aave integration became fully functional also remains unspecified.

Why This Matters

The materials describe a narrow update: Circle has added Aave as a second lending protocol for its Digital Asset-Backed Borrowing (DABB) service, which allows institutional clients to borrow USDC against Bitcoin collateral tokenized as cirBTC. The specific parameters and liquidation thresholds for Aave’s cirBTC/USDC market.

Broader Context

Source materials place the factual news in this context: Circle has added Aave as a lending option inside its Bitcoin-backed borrowing service for Circle Mint clients, according to The Defiant.