Circle is entering the packaged Bitcoin space, with its product cirBTC primarily aimed at institutions. According to the company, cirBTC will be backed 1:1 by BTC, adding that the token will be “easily verifiable” on-chain.
The measure aims to tap Bitcoin’s $1.7 trillion liquidity. The token will be seamlessly integrated into Circle’s broad network, including the Arc chain and the broader DeFi ecosystem.
For the unknown, wrapped Bitcoin tokens allow users to leverage credit, lending, and other DeFi activities in Ethereum and other chains.
Will Circle’s Wrapped Bitcoin Benefit from Trust?
However, it is worth noting that the wrapped Bitcoin segment is plagued with trust issues. In August 2024, the biggest competitor in the space, BitGo’s WBTC, faced off community response. This was it after it partnered with Justin Sun’s BiT Global.
The deal with BiT Global gave Justin Sun access to the BTC in cold storage, which was used as collateral to back WBTC. This confused some investors and caused some outflows at the time.
Coinbase sensed the distrust and vacuum that was created and seized the opportunity. It quickly cbBTC revealedits rival product. It was an instant success. In just two months, it surpassed $1 billion in market capitalization. Over the past two years, supply in the cbBTC market has grown to $6 billion, underscoring strong demand.
However, it wasn’t long before Coinbase also faced scrutiny from the community due to a lack of verifiable reserves to back cbBTC. Coinbase CEO Brian Armstrong’s response further alienated the community. He said,
Regarding cbBTC: yes, you are relying on a centralized custodian to store the underlying BTC – we have never stated otherwise.
The exchange eventually shrunk and placed a certificate of reserves on its product. However, the distrust remained.
And it looks like Circle is betting on this. For Circle’s CEO, Jeremy Allaire, cirBTC will be a ‘neutral’ on-chain asset.
cirBTC is coming. We are bringing the same infrastructure that supports USDC, EURC, and USYC to the largest digital asset, creating a neutral infrastructure for new applications for on-chain BTC.
Similarly, Circle’s CTO Nikhil Chandhok shared the same ‘trust’ framework.
For her part, Rachel Mayer, VP of Product at Circle and Arc, reinforced the same view, adding:
$1.7 trillion worth of Bitcoin is on the sidelines of DeFi. Not because people don’t want returns or liquidity, but because they don’t trust the packaging. cirBTC is Circle’s answer.
It is unclear how the market will receive the product. Especially considering that it will compete with Coinbase, the long-term distribution partner for USDC.
Final summary
- Circle is about to debut its packaged Bitcoin product, cirBTC, with “verifiable” reserves to address previous trust issues in the space.
- It will compete directly with Coinbase, the long-term distribution partner for USDC stablecoin.