TL;DR
- BitGo plans to transfer control of Wrapped Bitcoin (WBTC) to a joint venture with BiT Global, involving Justin Sun and the Tron ecosystem.
- MakerDAO is considering limiting exposure to WBTC due to concerns about potential risks associated with the new WBTC governance.
- BA Labs has recommended immediate action to reduce WBTC debt limits on MakerDAO and disable WBTC lending on SparkLend.
BitGo’s recent announcement about transferring control of the Wrapped Bitcoin (WBTC) product to a joint venture with BiT Global has raised concerns within the MakerDAO community.
This restructuring, which is scheduled to be completed in 60 days, involves a collaboration with Justin Sun and the Tron ecosystem.
WBTC custody will move to multiple jurisdictions, including Hong Kong and Singapore, marking a significant shift from current custody in the United States.
Justin Sun’s involvement in this new control structure has raised concerns, especially considering Sun’s previous experience with control of the TrueUSD (TUSD) stablecoin.
Since TUSD was transferred to its control, the currency has experienced issues with operational transparency and deteriorated processes, such as the suspension of real-time proof of reserves and several disruptions in redemption services.
This background has led BA Labs, a web3 risk analysis team, to warn of the potential risks that MakerDAO could face by continuing to allow WBTC to serve as collateral for the issuance of its DAI stablecoin.
BA Labs has proposed several actions to mitigate these risks. It recommends that MakerDAO reduce the debt limits on WBTC core vaults to zero and disable WBTC lending on the SparkLend protocol.
These measures are intended to limit MakerDAO’s exposure to potential issues associated with the change of control of WBTC and ensure the stability of the protocol.
Concerns about WBTC custody at MakerDAO
The MakerDAO community is divided on these recommendations.
While some members support the caution suggested by BA Labs, others believe the proposed measures are extreme.
Despite the controversy, the importance of WBTC collateral in the decentralized finance (DeFi) ecosystem means that any such decision should be taken with caution.
BitGo, for its part, has attempted to allay concerns by assuring that the underlying security of WBTC will not change with the new structure.
BitGo CEO Mike Belshe has emphasized that the company will continue to co-sign transactions and that custody will be adequately secured.
However, BA Labs has noted that BitGo’s announcement lacks critical information, such as BiT Global’s corporate details and the rationale behind the restructuring.
Furthermore, Galaxy Digital’s recent failed acquisition of BitGo has raised questions about BitGo’s financial stability.
These events have heightened concerns about the counterparty risk that BitGo could pose to MakerDAO and other protocols that rely on WBTC as collateral.
As the MakerDAO community debates the way forward, the DeFi ecosystem remains closely watching developments regarding WBTC and its future governance.
Whatever decision MakerDAO makes could have significant implications for the stability of DAI and the role of WBTC within the broader crypto space.
