PAPY-USDC earns yield by lending stablecoin deposits against overcollateralized tokenized real-world assets (RWAs), and is available today as part of Arc’s public mainnet launch.
Bitwise Asset Management, a global crypto asset manager with $9 billion in client assets, announced the expansion of the Bitwise Premium RWA Vault (PAPY) to the Arc blockchain as part of the network’s public mainnet launch.
The PAPY-USDC vault on Arc accepts USDC to make overcollateralized loans against tokenized real-world assets (RWAs), with a target of 5-6% APY. It arrives two weeks after the launch of the inaugural PAPY-AUSD vault on Ethereum, which has since taken in more than $20 million in deposits (as of September 15, 2026). By lending against real-world credit, PAPY aims to deliver yield that is more durable and less correlated with crypto markets than most onchain lending offers today.
How PAPY works on Arc. Lenders deposit USDC into the PAPY-USDC vault on the Morpho protocol. Those deposits are then lent to borrowers who post white-listed RWA collateral and pay an algorithmically derived, variable interest rate. For PAPY vaults, Bitwise’s curation involves predetermining the vault’s parameters and precalibrating its models—including acceptable collateral, loan-to-value ratios, and interest-rate configuration—without taking custody of or exercising discretionary management over user assets.
The collateral accepted for PAPY-USDC includes:
- Huma Finance’s PST: Short-duration cross-border payment financing. Loans are made to licensed financial institutions on one- to seven-day terms, with zero historical defaults across $17 billion in transaction volume.
- USDai: Loans backed by GPUs powering AI infrastructure. The collateral sits in a bankruptcy-remote SPV with a first-priority lien, is independently monitored, and loans self-liquidate; its value is warranted and reinsured via a Munich Re subsidiary.
Read More on Fintech : Global FinTech Interview: AI and the future of fintech with Hugh Cumming, CTO, Vena
Excess liquidity is allocated to lending markets backed by cirBTC.
USDC, the deposit asset. Deposits are made in USDC,1 a stablecoin issued by regulated entities of Circle, with a market cap of more than $74 billion as of September 15, 2026. USDC is fully backed by cash and short-dated U.S. Treasuries, held in reserve at regulated financial institutions.
Note: All descriptions and figures above are as stated by the provider.
Why Arc? Arc is purpose-built for stablecoin payments, foreign exchange, and tokenized assets. It uses USDC as its native gas token and settles with sub-second finality. For a vault that lends against real-world credit like PAPY-USDC, Arc’s combination of institutional validators, stablecoin-native settlement, and a network designed around tokenized assets presents an optimal growth environment.
Why RWAs? Most onchain yield today comes from two crowded models: commoditized bitcoin-backed lending or crypto-native yield farming. PAPY offers a more durable approach. Loans secured by RWAs tap deeper traditional-finance credit markets, so the interest borrowers pay isn’t tied to crypto cycles or onchain liquidity.
“Our long-term view is that most onchain credit will eventually be backed by real-world assets,” said Jonathan Man, Portfolio Manager at Bitwise. “Getting there means meeting institutional capital where it lives. Arc is purpose-built for stablecoin settlement and tokenized assets, and its validator set is institutional from top to bottom. We’re making vault curation a core part of what Bitwise does, and every PAPY vault brings more real-world credit onchain.”
“We’re excited to have Bitwise curating on Morpho and launching their first vault on Arc,” said Merlin Egalite, Co-Founder of Morpho. “Morpho supports a rich set of RWAs and what Bitwise adds is the expertise to combine them into a single diversified strategy, giving users new curated ways to access real-world yield. This is how the Morpho network expands DeFi into new risk profiles and strategies that weren’t possible before.”
As more of the world’s capital moves onchain, Bitwise expects real-world assets to lead the way — and PAPY is designed to give lenders access to that trend through transparent, programmatic lending infrastructure. It’s the newest way Bitwise is connecting traditional finance and onchain markets, from ETFs and staking to tokenized portfolios and vault curation.
Catch more Fintech Insights : Global FinTech Innovations Are Transforming Banking into Continuous Financial Guidance
[To share your insights with us, please write to psen@itechseries.com ]
