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Crypto’s largest decentralized stablecoin issuer just passed an omnibus governance proposal that includes provisions to freeze new borrows against WBTC.
What’s the Scoop?
- Custody Calamity: Last week, longtime WBTC custodian BitGo announced that it would become a minority shareholder in the product under a new joint venture agreement with BiT Global (i.e.; Justin Sun and the
Tron Ecosystem), spawning concerns about potential misappropriation resulting from the group’s access. - Lending Freeze: In response to the changes, MakerDAO has approved a proposal to reduce the DAI debt ceiling and loan-to-value ratios for WBTC facilities to zero, effectively halting new borrows against BitGo’s pegged BTC instrument.
- Collateral Closure: If the new WBTC venture is unable to convince Maker that its token’s collateral status remains safe, a full off-boarding of all WBTC integrations could commence, forcibly liquidating borrowers who do not close out their positions.
Bankless Take:
Maker’s decision to preemptively limit WBTC borrows highlights the clear concerns raised by BitGo’s unexpected divestment from the product. The WBTC merger not only grants a new entity with a mixed reputation majority control over the token and its backing, it also indicates financial distress within BitGo that reflects negatively on the counterparty risk of the current custodian.
Bitcoin Gets Wrapped in Drama on BanklessJustin Sun’s role in a joint venture governing WBTC has Crypto Twitter in a tizzy.
Jack Inabinet
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