Sky to Gradually Reduce Exposure to WBTC amid Justin Sun Controversy

Coinspeaker
Sky to Gradually Reduce Exposure to WBTC amid Justin Sun Controversy

Sky, a prominent decentralized finance (DeFi) protocol, will gradually end exposure to wrapped Bitcoin WBTC $58 002 24h volatility: -0.4% Market cap: $8.87 B Vol. 24h: $145.91 M amid a controversy that stems from an announcement by the WBTC team that stated that Tron blockchain founder Justin Sun and BiT Global, a crypto custody firm where Sun is an advisor, will be actively involved in the project.

According to a governance post submitted on Thursday, the issuer of the DAI stablecoin will remove “WBTC collateral exposure from the Sky Ecosystem, including Legacy Vault Types and SparkLend.” This is a major event in the digital asset space because Sky currently has $200 million of loans collateralized by wrapped Bitcoin.

It is important to note that WBTC allows holders of the asset to use the market-leading cryptocurrency, Bitcoin (BTC), on other blockchains. The digital asset plays a vital role in the crypto lending and borrowing sector as well, and WBTC has a market capitalization of $8.8 billion and a trading volume of $148 million.

“According to the proposal, the offboarding will be conducted in several steps over multiple Executive Votes. The process is expected to start in the Executive Vote on September 26, 2024,” said Sky.

Additionally, BA Labs, a firm that specializes in risk management and is a major advisor to the Sky Ecosystem, has warned the protocol against the potential risks associated with Sun’s involvement with the wrapped Bitcoin project and also proposed to gradually eradicate all the exposure to WBTC in five steps, with each step requiring a vote.

“We find that legal due diligence would not provide an adequate level of assurance,” said BA Labs.

On the other hand, Sky took to social media platform X (previously called Twitter) to ask the digital asset community to “close their WBTC Legacy Vaults and SparkLend positions” because the protocol will no longer engage with wrapped Bitcoin. Moreover, BA Labs has proposed Sky to onboard other cryptocurrencies that could be used as collateral instead of WBTC.

BitGo, the firm behind WBTC, announced last week that it would become a minority shareholder in its own project, and Justin Sun and BiT Global will be the majority stakeholders, taking all the crucial decisions regarding the wrapped Bitcoin project. While WBTC is mainly deployed on Ethereum, it is also available on other chains, including Base, Kava, Osmosis, and Tron.

Following the statement by BitGo, leading American crypto trading platform Coinbase decided to take advantage and confirmed its own wrapped Bitcoin product called the Coinbase Wrapped BTC (cbBTC). The exchange stated that cbBTC will be treated as equivalent to BTC in its order book and will be issued on Ethereum and Base.

cbBTC already has a market cap of $111,575 and a trading volume of $169,778. Some other competitors that have shown up include dlcBTC, Threshold’s tBTC and FBTC, which has the support of Mantle Network.

Sky to Gradually Reduce Exposure to WBTC amid Justin Sun Controversy