Can Circle compete against Coinbase as wrapped Bitcoin space heats up? 

 Circle is getting into the wrapped Bitcoin space, with its product cirBTC primarily targeting institutions. According to the firm, cirBTC will be 1:1 backed by BTC, adding that the token will be “readily verifiable” on-chain. 

The move is designed to tap into Bitcoin’s $1.7 trillion liquidity. The token will be seamlessly integrated into Circle’s wide network, including its Arc chain and wider DeFi ecosystem.  

For the unfamiliar, wrapped Bitcoin tokens allow users to leverage lending, borrowing, and other DeFi activity across Ethereum and other chains. 

Will Circle’s wrapped Bitcoin benefit from trust?

It’s worth noting, however, that the wrapped Bitcoin segment has been plagued by trust issues. In August 2024, the top contender in space, BitGo’s WBTC, faced community backlash. This was after it partnered with Justin Sun’s BiT Global. 

The deal with BiT Global allowed Justin Sun access to the BTC in cold storage, used as collateral to back WBTC. This unsettled some investors and triggered some outflows at that time. 

Sensing the distrust and vacuum created, Coinbase seized the opportunity. It quickly unveiled cbBTC, its rival product. It was an instant success. In just two months, it crossed $1B in market cap. In the last two years, the cbBTC market supply has grown to $6B, underscoring a strong demand.  

However, it wasn’t long before Coinbase also faced community scrutiny over a lack of verifiable reserves backing cbBTC. Coinbase’s CEO Brian Armstrong’s response further alienated the community. He said, 

As for cbBTC, yes, you’re trusting a centralized custodian to store the underlying BTC – we’ve never claimed otherwise.

The exchange eventually curved and posted proof of reserves for its product. However, the distrust lingered. 

And, it seems 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 infra 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’ framing. 

For her part, Rachel Mayer, VP of Product at Circle and Arc, also reinforced the same stance and added, 

$1.7T of Bitcoin is sitting on the sidelines of DeFi. Not because people don’t want yield or liquidity, it’s because they don’t trust the wrapper. cirBTC is Circle’s answer.

It is unclear how the market will receive the product. Especially given that it will compete with Coinbase, its long-term distribution partner for USDC.  

Final Summary 

• Circle is set to debut its wrapped Bitcoin product, cirBTC, with ‘verifiable’ reserves to ride on past trust issues in the space. 
• It will be in direct competition against Coinbase, its long-term distribution partner for USDC stablecoin.