Sky Reconsiders WBTC Offboarding Plan amid Fresh Advisory Recommendations

Coinspeaker
Sky Reconsiders WBTC Offboarding Plan amid Fresh Advisory Recommendations

Sky, formerly known as MakerDAO, is contemplating a shift in its recent decision to offboard Wrapped Bitcoin WBTC $63 433 24h volatility: -0.2% Market cap: $9.70 B Vol. 24h: $217.65 M as collateral from its non-custodial liquidity protocol, SparkLend and Legacy Vaults. This reconsideration comes after a fresh recommendation from an influential advisor following detailed discussions within the Sky community.

As of now, SparkLend holds $60.45 million worth of WBTC-backed debts, according to data from Block Analitica. The governance vote initially set the course for WBTC offboarding, but new developments may result in a reversal of this plan.

The initial decision to offboard WBTC collateral was made after a governance vote concluded on September 19, with a significant majority, 88.17%, of participants supporting the proposal. A total of 95,826 MKR tokens were pledged in favor, with 11.83% abstaining and no votes cast against it.

This governance decision set the stage for a phased offboarding of WBTC collateral, with the process scheduled to take place between October 3 and November 28.

The decision stemmed from concerns raised by Sky’s advisory body, BA Labs, regarding Tron founder Justin Sun’s involvement in a partnership between BitGo and BitGlobal. BitGo, previously the sole custodian of the bitcoin backing WBTC, struck a strategic deal with Sun in August. BA Labs feared Sun’s track record with affiliated projects posed a counterparty risk, particularly since around $200 million worth of loans on the platform were tied to WBTC collateral.

Despite the initial offboarding vote, the issue remained under active discussion. Mike Belshe, CEO of BitGo, extensively contributed to these talks on Sky’s forums. He clarified that the custody arrangement involving BitGlobal had been misunderstood and that Sun would not have the unilateral ability to alter key management practices at either BitGo or BitGo Singapore, two of the entities controlling the multi-signature keys for the custodian.

“They will not have the ability to direct changes to key management practices,” Belshe assured the community on September 20.

In light of this, BA Labs, in a statement on Tuesday, indicated that additional information and clarifications from BitGo had improved their comfort level with the existing WBTC custody setup. They observed that WBTC exposure on the platform had already decreased, with borrowing tied to the asset dropping to around $170 million.

As a result, BA Labs believes that the risk is now “more acceptable” and recommends that the offboarding of WBTC be paused indefinitely.

Meanwhile, on September 18, Aave, another major DeFi platform, faced a similar proposal on its governance forum concerning its WBTC exposure. While Aave is not offboarding WBTC, founder Stani Kulechov stated that the platform is considering a suggestion to limit its reliance on the token. Aave currently holds about $990 million in WBTC debt exposure.

The WBTC market cap now stands at $9.7 billion, down 40% from its 2021 peak of $15.68 billion.

Sky Reconsiders WBTC Offboarding Plan amid Fresh Advisory Recommendations