- Sky (formerly MakerDAO) is looking to put a pin in its WBTC offboarding plans.
- Sky has had extensive discussions with BitGo CEO Mike Belshe.
- WBTC concerns stem from Tron founder Justin Sun’s checkered past.
Over the past month, Wrapped Bitcoin (WBTC) , the most popular tokenized variant of Bitcoin commonly used to collateralize DeFi loans, has come under intense scrutiny from members of the crypto community. The scrutiny comes amid a new custody arrangement that would see BitGo, the token’s long-time custodian, hand over custody of the token to a joint venture with BiTGlobal, an entity linked with the controversial Tron Founder Justin Sun . This development has sparked fears over the future stability of the token.
These concerns have also given several DeFi lending platforms pause for thought over the continued use of WBTC for collateral, with one of these platforms, Sky, formerly MakerDAO, voting on September 19 to remove support for the token entirely. Less than a week later, however, the platform is now looking to reconsider its decision.
Sky (MakerDAO) to Make WBTC U-Turn?
Sky (formerly MakerDAO) is looking to put a pin in its WBTC offboarding plans. On Tuesday, September 24, Block Analitica (BA) Labs, the risk assessment firm behind the initial WBTC offboarding proposal, recommended that plans to implement the offboarding be put on hold indefinitely, setting a date for a new vote on October 3.
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The apparent change of heart follows extensive public discussions with BitGo CEO Mike Belshe in the Sky community forum. Belshe tried to clarify that, despite growing concerns, neither BiTGlobal nor Tron’s Justin Sun would be able to make changes to the management of WBTC’s custody unilaterally.
"They will be able to change the practices for the single key held with BitGlobal; although they have committed to use BitGo software/hardware. You can ask them this question too. They will not 'have the ability to direct changes to key management practices' at BitGo or BitGo Singapore. They will not 'have the ability to change control of key materials' at BitGo or BitGo Singapore," Belshe wrote.At the same time, the BitGo CEO assured that a 60-day notice would preempt any changes to these arrangements.
Responding to Belshe’s statements, BA Labs asserted that the additional details made the team “more comfortable” with WBTC’s current operations. At the same time, they argued that Sky’s WBTC exposure had dropped into a “more acceptable range,” falling from $200 million last week to about $170 million as of Tuesday, September 24.
The Concerns Around Justin Sun’s WBTC Links
Over the past year, there have been several instances where entities and assets that were linked and speculated to have been taken over by Justin Sun have faced transparency and stability concerns . These entities and assets include HTX (formerly Huobi) and TrueUSD (TUSD) . Sun has been accused of channeling funds under his management for personal ventures, while also doing away with, or compromising, transparency measures to cover his tracks.
According to investigations conducted by BA Labs, it is likely that Sun also has control of BiTGlobal. Per the investigation, the firm lists Yiying “Jennifer” Jiang as a director. This same person is listed as a director at TUSD and HTX.
Meanwhile, Justin Sun has downplayed his involvement with WBTC as “purely strategic,” with no oversight over asset management.
On the Flipside
- Amid the uproar over WBTC’s new custody arrangements, other wrapped Bitcoin variants have gained increased attention. These variants include Threshold’s tBTC and Coinbase ‘s recently launched cbBTC .
- WBTC’s market cap has remained largely stable amid the ongoing debates at around $9.7 billion.
Why This Matters
With a market capitalization of nearly $10 billion, WBTC has established itself as the go-to way for Bitcoin holders to engage in DeFi and benefit from sophisticated yield-bearing strategies.
Read this for more on MakerDAO’s WBTC dilemma:
Sky (MakerDAO) Decides to Offboard WBTC: Will Others Follow Suit?
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