Crypto exchange Kraken pushed deeper into the realm of decentralized finance (DeFi) Thursday, launching a wrapped Bitcoin product to compete within Ethereum’s ecosystem.

Dubbed kBTC, the Bitcoin-backed digital asset will take the form of an ERC-20 token, mirroring BitGo’s long-running and market-leading Wrapped Bitcoin (WBTC), which has a $10 billion market cap. But that won’t be Kraken’s only on-chain rival, with wrapped Bitcoin products launched by Coinbase (cbBTC) and 21.co (21BTC) last month.

In an announcement, Kraken highlighted what it said is a commitment to transparency, stating its token will feature on-chain reserves. An associated Bitcoin address at Kraken Financial, a special purpose depository institution (SPDI), indeed contains 100 Bitcoin worth approximately $6.7 million.

Often used in lending protocols as collateral, wrapped Bitcoin products have enabled owners of the underlying asset to participate in DeFi activity for years. Alongside the growing use of DeFi services, the company signaled ambitions to cement a presence moving forward.

“The future is on-chain,” Kraken’s Global Head of Asset Growth and Management Mark Greenberg said in a statement, adding that the product’s release “enables users to put their BTC to work and accelerates the adoption of DeFi.”

The exchange’s SPDI, regulated under Wyoming law, will also publicly manage addresses on Ethereum and Optimism, the popular Ethereum layer-2 network. Combined with the state’s regulatory framework, Kraken said kBTC offers “an unparalleled level of security and trust.”

Kraken’s wrapped Bitcoin foray follows debate surrounding WBTC’s new custody arrangement. The asset’s custodian, BitGo, forged a joint venture months ago with a Hong Kong-based custody platform, BiT Global, sparking concerns over the latter firm’s connection to Justin Sun.

In August, the Tron network co-founder’s potential influence over WBTC was flagged within the governance forum for DeFi lender Sky, formerly MakerDAO. A risk management consultant for Sky named monet-supply wrote that the “venture presents an unacceptable level of risk.”

BitGo CEO Mike Belshe assuaged the bulk of the Sky community’s concerns, clarifying how BiT Global would have limited control over WBTC minting. Earlier this month, a Sky proposal still passed, increasing a so-called stability fee for WBTC lent on Sky for its stablecoin Dai.

After Sun described the launch of Coinbase’s wrapped Bitcoin product as a “dark day for BTC,” the San Francisco-based exchange defended itself. The exchange told Decrypt previously that its ”industry-leading security and operational practices will prevent any malicious intents.”

“It has been a privilege to help secure WBTC on behalf of the community for the last 5 years as it grew to a $10 billion asset,” a BitGo spokesperson told Decrypt following Thursday's announcement from Kraken. “We look forward to seeing this market grow."

BiT Global did not immediately respond to a request for comment from Decrypt. 

Since its introduction in early September, cbBTC has reached a supply of 6,515 tokens collectively worth $440 million, according to a Dune dashboard. Over the same period of time, WBTC’s supply has shrunk from 153,000 to 149,000, according to a separate Dune dashboard.

It remains to be seen how large Kraken’s footprint could grow, with 21.co making modest inroads. While the parent company of ETF issuer 21Shares launched its product before Coinbase, 21BTC’s supply has grown to 116 tokens so far, according to another Dune dashboard.

Edited by Andrew Hayward