- WBTC-backed loans halted due to custody worries
- BitGo’s custody transfer to BiT Global triggers decision
- Justin Sun’s involvement raises red flags at MakerDAO
- Existing loans remain unaffected, new loans cease
MakerDAO Acts on WBTC Custody Shift Concerns
MakerDAO, one of the most influential decentralized finance (DeFi) platforms, has recently taken a critical step by halting the issuance of new loans backed by Wrapped Bitcoin (WBTC). This move stems from concerns regarding a significant change in the custody management of WBTC, driven by a recent decision from BitGo, the company responsible for WBTC’s custody.
BitGo’s Custody Transfer Raises Alarm
BitGo recently announced its plans to transfer the custody of WBTC from the United States to a new joint venture, BiT Global. The venture has ties to Justin Sun, the founder of Tron, a prominent yet controversial figure in the cryptocurrency world. This shift in control has raised alarms within the MakerDAO community, especially among its risk management team.
The team’s main concern revolves around the potential increased influence Justin Sun could gain over WBTC, given his checkered history with other crypto projects. Sun has been involved in various incidents that have attracted scrutiny and skepticism in the crypto space, prompting MakerDAO to take a cautious stance.
MakerDAO Sets WBTC Debt Ceiling to Zero
In response to these developments, MakerDAO has decided to set the WBTC debt ceiling to zero. This means that no new loans can be issued using WBTC as collateral. However, it’s important to note that this decision does not affect existing loans backed by WBTC. Borrowers who already have loans in place can continue to manage them as usual, but no new loans will be initiated until further notice.
This decision underscores MakerDAO’s commitment to risk management and protecting the integrity of its lending platform. By freezing new WBTC-backed loans, MakerDAO aims to safeguard its users and the broader DeFi ecosystem from potential risks associated with the custody changes.
For those in the crypto space, this move highlights the importance of custody and the entities that control it. As DeFi platforms like MakerDAO continue to grow, the security and reliability of collateral assets remain paramount.
