W3i Software Moves to Bring Privacy-First Stablecoins to Midnight With ShieldUSD

 

As the stablecoin market matures, a growing number of projects are focusing on what many see as the next missing piece of on-chain finance: privacy that works alongside regulation, not against it.

That is the direction W3i Software is taking with ShieldUSD, a USD-pegged stablecoin being built for the Midnight Network, a privacy-focused blockchain designed for confidential smart contracts and selective disclosure.

The project aims to deliver a digital dollar that preserves transactional privacy while remaining compatible with compliance and audit requirements, a balance that has proven difficult for most stablecoin models to strike.

 

A Stablecoin Designed for Real-World Privacy

ShieldUSD is being developed by W3i Software in collaboration with Moneta Digital and Norwegian Block Exchange (NBX), combining regulated issuance with Midnight’s privacy-native infrastructure.

Unlike most dollar-backed stablecoins, which expose transaction details publicly on chain, ShieldUSD is designed to allow users to transact confidentially by default. Sensitive information such as counterparties, amounts, or transaction logic can remain private, while still allowing selective disclosure when required for regulatory, legal, or audit purposes.

For many businesses and institutions, that distinction matters. Public blockchains have made settlement faster and more programmable, but the lack of confidentiality has limited adoption in areas like payroll, supplier payments, and enterprise finance. ShieldUSD is explicitly targeting those gaps.

 

Building on Midnight’s Privacy-Native Architecture

ShieldUSD is being built specifically for the Midnight Network, a Layer 1 blockchain developed to support privacy-preserving applications from the ground up. Midnight uses advanced cryptographic techniques to enable confidential transactions and smart contracts without sacrificing verifiability or compliance.

That design allows developers to define what data is private, what is shareable, and with whom. Rather than forcing transparency or secrecy across the board, Midnight supports selective disclosure as a native feature.

ShieldUSD fits naturally into that model. It is intended to function as a settlement asset that can move privately within applications, while still offering the assurances needed by regulators, auditors, and institutional counterparties.

 

W3i’s Experience With Regulated Stablecoins

W3i Software brings prior experience to the project through its work on USDM, a regulated fiat-backed stablecoin in the Cardano ecosystem. That background has shaped ShieldUSD’s approach, particularly around compliance, custody, and reserve transparency.

By pairing that experience with Midnight’s privacy infrastructure, the project aims to show that privacy-preserving finance does not need to exist in tension with regulation. Instead, it can be engineered to support it.

 

A Broader Shift in Stablecoin Design

ShieldUSD arrives amid a broader rethinking of how stablecoins should function as they move deeper into mainstream finance. While transparency has been a core feature of early stablecoins, it has also created unintended consequences, including transaction surveillance and data leakage that make certain use cases impractical.

As AI agents, automated trading systems, and on-chain business logic become more common, privacy is increasingly viewed as a functional requirement rather than a philosophical preference. Midnight’s architecture reflects that shift, positioning privacy as infrastructure rather than an add-on.

ShieldUSD is one of the first stablecoin projects explicitly designed around that premise.

 

Momentum Around the Midnight Ecosystem

The announcement also adds momentum to the Midnight Network more broadly, which has been steadily building toward mainnet readiness with a focus on regulated, privacy-aware applications. The presence of a native, privacy-preserving dollar stablecoin strengthens Midnight’s value proposition as a settlement layer for real-world finance.

While ShieldUSD will still need to build liquidity and adoption in a competitive stablecoin market, its design aligns closely with the needs of enterprises and institutions that have largely remained on the sidelines of public blockchains.

 

What to Expect next

Challenges remain. Privacy-preserving systems are more complex to implement, and regulatory expectations around stablecoins continue to evolve. Still, ShieldUSD represents a clear step toward a more nuanced model of on-chain money, one that treats privacy as compatible with compliance rather than something to be sacrificed.

If successful, ShieldUSD could help demonstrate how stablecoins evolve beyond transparent consumer tokens into serious financial infrastructure, and position Midnight as a network purpose-built for that next phase.

 

For a sector still searching for scalable, privacy-aware settlement tools, ShieldUSD and the Midnight Network offer a direction that many in the industry have been waiting for.

 

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BitcoinOS has successfully secured a USD 10 million funding round, led by Greenfield Capital with participation from firms such as FalconX, Bitcoin Frontier Fund, and DNA Fund. The capital will accelerate BOS’s development of infrastructure aimed at transforming Bitcoin into a more programmable, institution-ready asset base through protocols such as “Grail Pro”.

BOS has already achieved a milestone by verifying the first zero-knowledge (ZK) proof on the Bitcoin mainnet, a technical breakthrough that opens the door for greater programmability and institutional deployment of Bitcoin.

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What Is BOS Aiming to Build?

The core ambition of BOS is to make Bitcoin not only a store of value, but also a dynamic foundation for institutional finance — often called “BTCFi” (Bitcoin-based decentralized finance). The Grail Pro protocol they are building allows large custodians and institutions to deploy their Bitcoin holdings into yield-generating activities without giving up custody of their assets. Through a structure of distributed cosigners and Trusted Execution Environments (TEEs), institutions can mint a token (zkBTC) backed 1:1 by native Bitcoin.

In short, BOS is designed to enable institutions to:

• Earn yield on Bitcoin holdings while retaining custody.

• Bridge Bitcoin securely into other chains or financial rails without full trust in intermediaries.

• Unlock dormant Bitcoin (held by institutions or funds) and put it to productive use.

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Why This Matters

Bitcoin has long dominated as a digital store of value, but its use in DeFi-style applications has lagged behind blockchains like Ethereum. The emergence of BTCFi infrastructure is now changing that. By unlocking institutional capital and making Bitcoin more functional as collateral or yield asset, BOS and similar protocols aim to open large new pools of liquidity.

With institutions holding billions of dollars in Bitcoin, even small activation of those holdings into yield, lending, or interoperable use cases can have outsized impact. The funding round thus signals confidence from sophisticated investors that Bitcoin’s role in the financial ecosystem is evolving.

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Broader Context & Ecosystem Dynamics

• The rise of BTCFi has been noted by several industry observers: Bitcoin’s utility is extending from mere “HODL asset” status to one where it can actively generate returns and participate in financial networks.

• BOS isn’t operating in isolation. They are partnering and integrating with other networks and infrastructures (for example, layering with Bitcoin-compatible rollups or bridging technologies) to enhance interoperability and scalability.

• Security and custody remain paramount. BOS’s architecture emphasises institutional-grade safety, distributed cosigner models and zero-knowledge proofs to reduce counterparty risk — a key concern for institutional adoption.

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What to Watch

Investors, users and institutions should keep an eye on several developments:

• How quickly Grail Pro is adopted by major custodians and institutions, and how large the total value locked (TVL) becomes.

• Whether institutions will actually migrate significant Bitcoin holdings into protocols built on BOS, thereby demonstrating the business case for BTCFi.

• How regulators respond to the institutionalisation of Bitcoin finance, particularly given that these models enable new financial uses for Bitcoin beyond its traditional store-value role.

• The competitive environment: as more providers work on institutional Bitcoin finance infrastructure, BOS’s ability to differentiate, secure partnerships, and scale will be critical.

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Conclusion

BitcoinOS’s USD 10 million raise marks a significant milestone in the evolution of institutional Bitcoin finance. By developing infrastructure such as Grail Pro that preserves institutional standards of custody, security and compliance, BOS is helping push Bitcoin into a more functional role beyond being simply “digital gold.”

 

For institutions, this could mean better options to deploy Bitcoin in efficient ways, to earn yield, and to engage in cross-chain financial activity. For the broader ecosystem, it signals that Bitcoin’s narrative is shifting: from a passive reserve asset to an active component of financial infrastructure. If BOS and its peers succeed in unlocking institutional Bitcoin at scale, the implications for crypto-finance could be major.