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Bitwise Asset Management has taken its Premium RWA Vault, better known as PAPY, to Circle’s Arc blockchain. The vault now sits atop the yield rankings among Morpho vaults on the network, posting a net APY of 4.79%.
How the PAPY-USDC vault works
The expansion went live on September 16, 2026, timed to coincide with Arc’s public mainnet launch. The new product, called PAPY-USDC, runs on the Morpho lending protocol using its Vault V2 architecture.
Users deposit USDC, and the vault lends that money out to borrowers who post tokenized real-world assets, or RWAs, as collateral. Those loans are overcollateralized. Borrowers have to lock up more value than they take out, which gives lenders a cushion if things go sideways.
The collateral accepted includes Huma Finance’s PST and sUSDai. The vault may also allocate to cirBTC markets, adding another potential lending venue.
Bitwise acts as the curator but stays non-custodial. It never holds depositors’ funds directly. Instead, it sets the rules: which collateral qualifies, what loan-to-value ratios apply, and which interest-rate models the vault uses.
The numbers behind the vault
PAPY-USDC targets a variable APY of 5-6%. As of early October 2026, the vault reported a net APY between 4.8% and 5.55%, with the Morpho app showing 4.79%.
The fee structure is light. Bitwise charges a management fee of approximately 0.39-0.4%, and there is no performance fee.
Deposits are still modest. In early October 2026, the vault held between $418K and $422K in USDC. The vault’s capacity is capped at roughly $1B.
The vault follows the ERC-4626 standard and has no lock-up requirements. Depositors can withdraw when they want, subject to the vault’s available liquidity.
A second act after Ethereum
Arc is not PAPY’s first stop. Bitwise launched a PAPY-AUSD vault on Ethereum on September 2, 2026. That version pulled in over $20 million in deposits within two weeks.
The Arc version arrived just two weeks after the Ethereum launch. The key difference is the currency: Arc’s vault is built around USDC from day one.
Bitwise brings an established footprint to the effort, with $9 billion in client assets.
What this means for DeFi lending and RWA yield
For Morpho, the expansion reinforces its role as infrastructure that curators can deploy across multiple networks. Bitwise now runs PAPY on Morpho on both Ethereum and Arc.
The vault’s yields have been variable, ranging from 4.8% to 5.55% in recent reporting, and sometimes falling short of the 5-6% target. Collateral quality is the other key variable: overcollateralization offers protection, but the vault’s safety ultimately depends on how well assets like Huma’s PST and sUSDai hold their value and remain liquid.
Disclosure: This article was edited by Kaye Quema. For more information on how we create and review content, see our Editorial Policy.
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