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Cryptocurrency News Articles
Sky Reconsiders Removing Wrapped Bitcoin (WBTC) as Collateral After Receiving New Recommendation from BA Labs
Sep 25, 2024 at 10:51 pm
Sky, the pioneering decentralized finance (DeFi) platform, is reconsidering its decision to remove Wrapped Bitcoin (WBTC) as collateral within its lending protocol after receiving a new recommendation from BA Labs, one of its key advisers.
Sky is reconsidering its decision to remove Wrapped Bitcoin (WBTC) as collateral in its lending protocol following a new recommendation from BA Labs, one of its key advisors.
On September 24, BA Labs proposed pausing the WBTC offboarding plan after an in-depth discussion with BitGo co-founder Mike Belshe, who provided several clarifications regarding the management and custody of the assets backing WBTC.
BitGo, which was recently the sole custodian of the Bitcoin backing WBTC, sparked concerns within the Sky community after announcing a partnership with BitGlobal, a company tied to Justin Sun. This prompted a governance vote on September 19, where 88% of the Sky community supported a plan to gradually phase out WBTC from the protocol. However, BA Labs has advised to reassess the situation after obtaining new clarifications from BitGo.
BitGo Must Maintain 100% Transparency
BitGo has committed to maintaining a high level of transparency, ensuring that any changes in WBTC custody will be announced publicly at least 60 days in advance. This commitment, coupled with a decreased exposure to WBTC of $170 million in total borrowing, led BA Labs to conclude that the present risk is manageable and does not warrant the immediate removal of the collateral.
On one of Sky’s platforms, SparkLend, the exposure to WBTC has also decreased substantially, reaching $61 million.
During the discussion, Mike Belshe expressed concern over the possibility of Sky opting for Coinbase's cbBTC, a centralized option that does not offer proof-of-reserves. Belshe highlighted that this change could introduce uncollateralized risk of up to one billion dollars, potentially increasing the platform's overall risk exposure.
On October 3, a new executive vote will determine whether to implement the changes recommended by BA Labs. These include reconsidering the offboarding plan and making adjustments to liquidation policies, such as reducing penalties and adjusting fees applied to Sky’s lending products, including Legacy Vaults and SparkLend.
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