Key Takeaways
- • Bitwise Asset Management launched PAPY-USDC on Arc blockchain as part of Arc's public mainnet debut, enabling USDC lenders to earn 5-6% APY through overcollateralized loans against tokenized real-world assets on Morpho protocol.
- • The inaugural PAPY-AUSD vault on Ethereum accumulated over $20 million in deposits within two weeks of launch (as of September 15, 2026), demonstrating strong institutional demand for RWA-backed yield strategies.
- • PAPY accepts whitelisted RWA collateral including Huma Finance's PST (short-duration cross-border payment financing with zero historical defaults across $17 billion in transaction volume) and USDai (GPU-backed AI infrastructure loans).
- • Bitwise's curation model sets vault parameters, collateral acceptance criteria, and loan-to-value ratios without exercising discretionary asset management or taking custody, positioning PAPY as a structured yield product targeting yield less correlated with crypto market volatility.
- • The expansion to Arc represents Bitwise's multi-chain strategy for RWA lending, leveraging Morpho's decentralized lending protocol infrastructure to scale institutional stablecoin deployment into real-world credit markets.
Summary
Bitwise Asset Management, managing $9 billion in client assets, announced the expansion of its Bitwise Premium RWA Vault (PAPY) to the Arc blockchain on September 16, 2026, coinciding with Arc's public mainnet launch. The PAPY-USDC vault enables depositors to supply USDC into a lending vault on the Morpho protocol, targeting 5-6% annual percentage yield by making overcollateralized loans against tokenized real-world assets.
The product mechanism operates through a structured framework where USDC deposits are lent to borrowers who post whitelisted RWA collateral and pay algorithmically derived variable interest rates. Bitwise's role involves precalibrating vault parameters—including acceptable collateral types, loan-to-value ratios, and interest-rate configurations—without exercising discretionary management authority or taking asset custody. This approach positions PAPY as a passive, rules-based strategy rather than an actively managed fund.
Acceptable collateral for PAPY-USDC includes Huma Finance's PST (short-duration cross-border payment financing on one- to seven-day terms provided to licensed financial institutions, with zero historical defaults across $17 billion in cumulative transaction volume) and USDai (loans backed by GPUs powering AI infrastructure). The collateral diversification underscores the strategy's focus on real-world credit risk rather than crypto-native volatility.
The Arc deployment follows the launch of the inaugural PAPY-AUSD vault on Ethereum two weeks prior, which had already accumulated over $20 million in deposits as of September 15, 2026. This rapid capital deployment suggests institutional appetite for yield products backed by tangible real-world credit and suggests Bitwise's multi-chain expansion is meeting market demand for durable, less volatile yield alternatives to traditional on-chain lending.
The product mechanism operates through a structured framework where USDC deposits are lent to borrowers who post whitelisted RWA collateral and pay algorithmically derived variable interest rates. Bitwise's role involves precalibrating vault parameters—including acceptable collateral types, loan-to-value ratios, and interest-rate configurations—without exercising discretionary management authority or taking asset custody. This approach positions PAPY as a passive, rules-based strategy rather than an actively managed fund.
Acceptable collateral for PAPY-USDC includes Huma Finance's PST (short-duration cross-border payment financing on one- to seven-day terms provided to licensed financial institutions, with zero historical defaults across $17 billion in cumulative transaction volume) and USDai (loans backed by GPUs powering AI infrastructure). The collateral diversification underscores the strategy's focus on real-world credit risk rather than crypto-native volatility.
The Arc deployment follows the launch of the inaugural PAPY-AUSD vault on Ethereum two weeks prior, which had already accumulated over $20 million in deposits as of September 15, 2026. This rapid capital deployment suggests institutional appetite for yield products backed by tangible real-world credit and suggests Bitwise's multi-chain expansion is meeting market demand for durable, less volatile yield alternatives to traditional on-chain lending.
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