Paper uses it in circulation (6)
I believe the answer is:
tissue
'paper' is the definition.
(tissue paper is a kind of paper)
'uses it in circulation' is the wordplay.
'in circulation' indicates an anagram.
'uses'+'it'='usesit'
'usesit' is an anagram of 'TISSUE'.
(Other definitions for tissue that I've seen before include "Jewish religious leader" , "'Soft, thin paper (6)'" , "Bodily matter" , "Cloth" , "series of lies" .)