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Cryptocurrency News Articles
Sky (MakerDAO) to Eliminate All WBTC Exposure over Justin Sun Ties
Sep 21, 2024 at 05:03 am
Sky, formerly MakerDAO, will offboard WBTC over Justin Sun ties. This decision follows a governance vote that ended on Thursday, September 19.
Popular tokenized Bitcoin, Wrapped Bitcoin (WBTC), has come under scrutiny over the past month as its custodian, BitGo, announced plans to transfer custody of the asset to a joint venture with BiTGlobal, an entity linked to Tron founder Justin Sun. This move has raised concerns about the future transparency and reliability of the asset.
One of the earliest and most vocal critics of the WBTC custody change arrangement was the leading decentralized lending platform, Sky (formerly MakerDAO). After considering the matter for several weeks, the platform has decided to take drastic action to protect users from potential risks. Will others follow suit?
Sky (MakerDAO) to Eliminate All WBTC Exposure
Justin Sun ties will cause Sky to offboard WBTC. This decision was made following a governance vote that ended on Thursday, September 19. The vote saw 88% of participants support the move, while the remaining 12% chose to abstain.
The vote was sparked by a proposal from Sky advisor Block Analitica (BA) Labs. BA Labs first suggested that Sky reduce its WBTC exposure in August before calling for the total asset removal as collateral on the platform in a September 12 proposal.
The risk analysts argued that despite public statements to the contrary, shell companies and nominee directors likely gave Tron’s Justin Sun control over BiTGlobal. The team made this claim by pointing out that the firm lists Yiying “Jennifer” Jiang as a director. This same person is also listed as directors for other Sun-linked entities, including the embattled TrueUSD (TUSD) and HTX (formerly Huobi).
Citing the lack of transparency and stability from these entities aligning with Justin Sun's takeover, BA Labs surmised that there was little assurance that WBTC would not follow suit.
Sky has $200 million in loans backed by WBTC. The proposal from BA Labs provides a five-phase roadmap to offboard this collateral with minimal user impact. This roadmap will see Sky reduce its WBTC exposure to zero by the end of November 2024.
Sky may be the first of many to follow this path, as at least one other protocol is considering eliminating WBTC as collateral.
Aave Considers Proposal to Offboard WBTC
Aave, the largest decentralized lending protocol by TVL, is also considering a move to reduce its WBTC exposure to zero. A proposal to this effect was submitted on Wednesday, September 18 by the protocol’s risk management outfit, Llama Risk, citing conclusions on the matter that largely mirror those of BA Labs.
It remains to be seen whether Aave will proceed with this plan. Some in the community, including influential Aave Chan Initiative founder Marc Zeller, have spoken out against total offboarding, suggesting instead a supply cap limit.
Aave has nearly $1 billion in WBTC-backed loans.
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