BiT Global and Justin Sun’ will soon exercise control over Wrapped Bitcoin through a joint venture with BitGo.
MakerDAO is discussing whether to prevent users from minting its DAI stablecoin against Wrapped Bitcoin (WBTC) after BitGo, the team behind Wrapped Bitcoin, announced plans to transfer control over WBTC to a joint venture comprising itself, BiT Global, and Justin Sun’s Tron ecosystem.
On Aug. 10, BA Labs, a web3 risk and analytics team, published a proposal on MakerDAO’s governance forum calling for the project to reduce its WBTC vault debt ceilings to 0 DAI and disable WBTC borrowing on the SparkLend money market protocol.
BA Labs emphasized that while the measures would prevent new borrowing against WBTC, they would not have an immediate impact on existing users with outstanding loans or DAI mints collateralized by WBTC.
“BitGo announced it is planning to transfer control of the WBTC product to a joint venture with BiT Global,” BA Labs said. “BitGo has disclosed that this change implements a partnership with Justin Sun and the Tron ecosystem; as such we can infer that Justin Sun will have significant influence or control over the joint venture managing WBTC.”
The majority of BA Labs’ concerns relate to the involvement of Justin Sun, the founder of Tron, in the new joint venture. BA Labs claims that TrueUSD, a stablecoin sold to a Sun-linked conglomerate last year, suffered a “deterioration in operational processes and transparency” since the sale, including suspending real-time proof of reserves, price depegs, disrupted redemption services, and the resignation of its previous management team.
“We find that Sun’s involvement as a controlling interest in the new WBTC joint venture presents an unacceptable level of risk,” BA Labs said.
BA Labs added that Maker and Spark should consider fully offboarding WBTC if BitGo and related parties cannot “convincingly demonstrate that maintaining current collateral integrations are safe.”
Roughly 10% of DAI’s 5.2 billion token supply is backed by Wrapped Bitcoin, with Maker’s vaults currently holding $500 million worth of WBTC, according to Daistats. Users have also deposited $289.3 million worth of WBTC to SparkLend, making up 7% of the protocol’s $4.1 billion in total value locked.
BitGo announced its restructuring plans on Aug. 9, with the transition scheduled to take place after 60 days.
DAI is the third-largest stablecoin behind Tether and USD Coin.
Divided community
MakerDAO’s community is divided on the proposal, with some forum-goers expressing support for BA Labs’ recommendations — notably including Maker’s ecosystem team — while others articulated reservations.
GFX Labs, an analytics provider to MakerDAO, described the proposal as “extreme,” asserting that the measures would be inconsistent with how Maker treats other supported centralized assets, such as Ethena’s USDe stablecoin.
“This seems like a huge overreaction,” added Sparkuser, a Maker community member.
Rival tokenized Bitcoin issuers were eager to pitch their products as a potential replacement for WBTC, including ckBTC, tBTC, and dlcBTC.
Mike Belshe, the CEO of BitGo, characterized the proposal as a knee-jerk reaction to Sun’s involvement. “I’d encourage you to meet with the BiT Global team to hear how the custody will be secured along with BitGo,” Belshe said.
Belshe also stressed that BitGo will continue to co-sign transactions. “The underlying security is the same as what you have today,” he continued.
Monet-supply of BA Labs replied that BitGo’s announcement failed to communicate key information. They asked Belshe to share BiT Global’s company details, directors and offices, ownership structure, and the reasoning underpinning the restructure and Sun’s involvement.
Belshe said answering these questions would require the divulgence of “confidential information.” Belshe encouraged MakerDAO to appoint an attorney and conduct due diligence under a formal non-disclosure agreement with Bit Global.
Justin Sun also took to social media to address the concerns about his involvement with WBTC.
“My personal involvement in WBTC is entirely strategic,” Sun tweeted. “I do not control the private keys to the WBTC reserves and cannot move any BTC reserves… There have been no changes to WBTC.”
The price of Maker’s MKR token is down 3.7% in the past 24 hours, according to CoinGecko.
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