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

Circle is moving into the wrapped Bitcoin market with cirBTC, a product primarily aimed at institutions. The firm says cirBTC will be 1:1 backed by BTC and that the token will be “readily verifiable” on-chain.

Circle’s stated goal is to tap into Bitcoin’s $1.7 trillion liquidity and make wrapped Bitcoin available across its existing ecosystem. The company says cirBTC will be integrated into Circle’s network, including its Arc chain and the wider DeFi environment. Wrapped Bitcoin tokens are designed to let users use Bitcoin exposure for DeFi use cases such as lending, borrowing, and other on-chain activity across Ethereum and other chains.

Wrapped Bitcoin’s trust problem

The wrapped Bitcoin segment has faced recurring trust concerns. In August 2024, BitGo’s WBTC drew community backlash after BitGo partnered with Justin Sun’s BiT Global. The arrangement reportedly allowed Justin Sun access to BTC held in cold storage, used as collateral to back WBTC. The controversy contributed to investor unease and led to outflows at the time.

Coinbase’s cbBTC gains traction, then faces scrutiny

Coinbase moved to fill the perceived trust gap by launching cbBTC. The product reportedly reached $1B in market capitalization within two months. Over the following two years, cbBTC’s market supply grew to $6B, indicating strong demand.

However, Coinbase later faced community scrutiny over a perceived lack of verifiable reserves backing cbBTC. Coinbase CEO Brian Armstrong said, “As for cbBTC, yes, you’re trusting a centralized custodian to store the underlying BTC – we’ve never claimed otherwise.” Coinbase subsequently posted proof of reserves, but distrust persisted.

Circle’s “verifiable” approach

Circle appears to be positioning cirBTC as a solution to the wrapper trust issue. Circle CEO Jeremy Allaire described cirBTC as a “neutral” on-chain asset, saying it will bring the infrastructure used for USDC, EURC, and USYC to Bitcoin to support new on-chain applications.

Circle’s CTO Nikhil Chandhok also emphasized the trust framing. Rachel Mayer, VP of Product at Circle and Arc, said that $1.7T of Bitcoin is “sitting on the sidelines of DeFi” because people do not trust the wrapper, adding that cirBTC is Circle’s response.

Competition and outlook

It remains unclear how the market will respond to cirBTC. The product is set to compete directly with Coinbase, which is also Circle’s long-term distribution partner for USDC.

Summary

• Circle plans to launch cirBTC, a wrapped Bitcoin token said to be 1:1 backed by BTC and verifiable on-chain.
• The product is designed to address trust concerns that have affected the wrapped Bitcoin market, while targeting Bitcoin’s $1.7 trillion liquidity.
• cirBTC is expected to compete with Coinbase’s cbBTC, a major player in the segment.