Can This New Project Unlock Bitcoin’s $1.4T DeFi Market?

Summary

• Mysten Labs is launching Hashi, a new DeFi primitive on Sui designed to unlock native Bitcoin (BTC) as collateral without creating a taxable event.
• The core thesis is that 2026 will be the year Bitcoin truly becomes a collateral instrument in DeFi, addressing the current failure of L2s and wrapped assets (like WBTC) to capture more than ~1% of Bitcoin's value.
• Hashi differs from wrapped BTC (WBTC) by using a multi-party computation (MPC) wallet on the Bitcoin network, secured by Sui's ~125 validators, allowing BTC to be locked natively and used to mint stablecoins or originate loans on Sui.
• The primary target is institutional users (ETFs, sovereign wealth funds, banks) who have been unable to use existing solutions due to tax implications, centralization risks, and complex trust assumptions.
• Key innovations include formal verification of smart contracts, a guardian model as a backstop against validator collusion, and on-chain, Bitcoin-denominated insurance from partners like Ensuro.
• Over 24 launch partners include custodians (BitGo), exchanges (Bullish), financial institutions (FalconX, Herbruck), and DeFi protocols (Navì, Scallop, Alphalend).
• Specific products enabled include Bitcoin-denominated, rated bonds (via Wave Digital) and direct integration with Sui's lending protocols and stablecoins (USDC, FDUSD, agUSD, swUSD).
• The main perceived risks are Bitcoin network failure, Sui validator collusion, and smart contract bugs, mitigated by the guardian model, formal verification, and insurance.
• A major claimed advantage is a legal opinion that using Hashi does not constitute a taxable event in many jurisdictions, unlike wrapping BTC.
• The project is presented as a composable primitive for builders on Sui, not just an end-user product.
• The success metric is moving beyond the 1% of Bitcoin currently utilized in DeFi (via WBTC) by solving institutional trust, tax, and security concerns.