Circuit unveils recovery system to solve crypto’s ‘permanent loss’ conundrum

While Bitcoin is often heralded as the ultimate bearer asset, not everyone is prepared for self-custody in a world where convenient and seemingly trusted intermediaries still play a major role.

Circuit, an enterprise-grade recovery solution for digital assets, is betting that more institutions will turn to its recovery system to protect against catastrophic losses.

On Monday, the company announced the public launch of its institutional crypto recovery engine, powered by its Automatic Asset Extraction (AAE) technology. The system automatically transfers assets to a pre-authorized secure vault if a private key is lost or a threat is detected.

The solution debuts with two institutional users: UAE-based custodian Tungsten, and Palisade, a custody infrastructure provider used by crypto exchanges and tokenization services.

Circuit’s founder and CEO, Harry Donnelly, says the market for lost keys and custodial failures is underserved, especially as more institutional users flock to crypto. 

“The permanent loss of assets is one of the biggest barriers to mainstream adoption,” Donnelly told Cointelegraph in a written statement. “We see enormous media coverage of crypto hacks precisely because they’re irreversible, there’s no “undo” button like in traditional finance.”

Institutions must know their assets are recoverable before they enter the space with serious conviction, said Donnelly. 

“Institutions view asset recovery as a fundamental requirement, not a nice-to-have. As more enterprises hold digital assets, ensuring those assets don’t simply disappear becomes critical. The institutional mindset is about risk management and fiduciary duty.”

Lost Bitcoin is a “donation,” but there’s a catch

Many Bitcoin proponents view lost coins as a “donation” to the network, since they can’t be recovered, effectively reducing the circulating supply and potentially driving up prices.

While Donnelly agreed with the idea in principle, he said it doesn’t hold up from a practical standpoint, especially when considering broader adoption. 

“The idea that lost Bitcoin is just a ‘donation’ to other holders doesn’t sit well” for institutional users, he said.

While estimates vary, Ledger reports that between 2.3 million and 3.7 million BTC are lost or unrecoverable, representing roughly 11% to 18% of Bitcoin’s fixed supply.

“Most people aren’t equipped for true self-custody; it’s technically complex and comes with irreversible risks,” Donnelly said. “There’s a reason we have intermediaries and custodians in traditional finance: they provide safety nets when things go wrong.”