Bitwise Asset Management deployed its Premium RWA Vault, known as PAPY, onto Circle’s Arc network on September 16, 2026, launching a decentralized credit strategy that issues USDC loans against tokenized real-world assets. As diariobitcoin.com reported, the vault operated on Morpho and held between USD $418,000 and USD $422,000 in early October, delivering a net annualized yield of 4.79% against a target band of 5% to 6%.
Yield Realities on the Arc Network
The PAPY-USDC vault functions as a decentralized credit facility utilizing Morpho’s Vault V2 architecture. Depositors supply USDC into the protocol, which then deploys capital into overcollateralized loans backed by tokenized assets. At the start of October 2026, the application interface reported a net APY of 4.79%, falling short of the variable target range of 5% to 6%.
This yield compression stems from market utilization rates and fluctuating demand within the underlying credit pools. Bitwise acts as the vault curator rather than a direct custodian of the assets. The firm dictates risk parameters, sets loan-to-value caps, and determines eligible collateral types, but the underlying capital remains exposed to liquidity constraints during periods of market stress.
| Metric | Reported Value | Target / Capacity |
|---|---|---|
| Net APY (Early October) | 4.79% | 5% – 6% (Variable) |
| Total Deposits | USD $418,000 – $422,000 | USD $1,000,000,000 (Authorized Limit) |
| Management Fee | 0.39% – 0.4% | N/A |
| Launch Date | September 16, 2026 | Arc Mainnet Deployment |
Vault Restricts Exposure to Approved Collateral Types
The vault restricts its exposure to specific, approved collateral types managed through decentralized finance protocols. Current accepted assets include PST and sUSDai, both associated with Huma Finance. The architecture also maintains the technical capability to route capital into cirBTC markets, though the specific allocation percentages across these assets are not in the protocol's public data.
Because the loans rely on real-world asset tokenization, the safety of depositor capital depends on the liquidity and value of the underlying collateral. While the overcollateralization requirement forces borrowers to lock assets exceeding the value of the borrowed USDC, market liquidations can fail if secondary markets for these tokenized assets freeze. The structure adheres to the ERC-4626 standard, allowing users to withdraw unallocated liquidity without a mandatory lock-up period, provided the vault holds sufficient cash equivalents.
Management Fees Impact Net Yield for Depositors
Despite an authorized vault capacity ceiling of approximately USD $1 billion, actual adoption remains in a nascent phase.
The cost structure features a management fee ranging from 0.39% to 0.4%, while performance fees are absent from the current reporting. This fee burden directly impacts the net yield delivered to depositors, widening the gap between gross borrower rates and the final return visible on the Morpho interface.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
