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With WBTC being phased out, the protocol is now exploring alternative wrapped Bitcoin solutions.
Key Notes
Sky community members votes to remove WBTC as collateral to protect the protocol from impending risks which may arise from Justin Sun's involvement with custodianship.The vote ended on September 19 with close to 90% of community members voting in favour of the proposal.Sky is currently considering Coinbase’s cbBTC and Threshold’s tBTC as potential alternatives for WBTC.Sky, previously known as MakerDAO, has officially passed a governance vote to remove Wrapped Bitcoin WBTC $63 182 24h volatility: 2.2% Market cap: $9.66 B Vol. 24h: $154.09 M from its lending and borrowing ecosystem. The vote, which concluded on September 19, saw overwhelming community support, following rising concerns about WBTC’s custodianship and potential ties to controversial blockchain entrepreneur, Justin Sun.
According to Sky’s official website, nearly 90% of the governance community voted in favor of the proposal to remove WBTC as collateral. Out of the total votes cast, 95,826 MKR tokens were in support, while 11.83% of participants abstained, and no opposition votes were recorded. The decision marks a critical turning point for the platform’s strategy moving forward.
Key Concerns over WBTC’s Custodianship
The move to remove WBTC from Sky’s lending pool stems from concerns raised by its advisors at BA Labs. In August, the team flagged potential risks surrounding the ownership and control of WBTC, which was speculated to involve Justin Sun or his affiliates.
The company expressed worries that Sun’s track record in the blockchain industry could pose “significant counterparty risks” for the decentralized finance (DeFi) platform, urging a reassessment of WBTC’s role in Sky’s ecosystem.
BitGo, the custodian of WBTC, disclosed in August that it sought to transition control of the asset to a joint operation with BitGlobal, an entity closely linked to Justin Sun. The collaboration, with regulated operations based in Hong Kong, sparked concerns given Sun’s controversial standing in the crypto world.
As a result, BA Labs recommended removing WBTC from Sky’s platforms. On September 12, Sky’s team acted on these concerns by initiating a proposal to offboard WBTC from both its SparkLend platform and Legacy Vaults, seeking to mitigate the risks associated with Sun’s involvement.
Justin Sun Defends WBTC amid Criticism
As discussions about WBTC’s future intensified, Justin Sun publicly defended the asset, dismissing any associations with regulatory challenges in China. On September 13, Sun emphasized that WBTC, along with USDT USDT $1.00 24h volatility: 0.1% Market cap: $119.07 B Vol. 24h: $65.88 B and Tron TRX $0.15 24h volatility: 1.3% Market cap: $13.18 B Vol. 24h: $409.16 M , were not connected to Chinese regulations, criticizing Coinbase’s recently launched alternative, cbBTC.
Despite Sun’s assurances, Sky’s community pushed ahead with plans to decouple from WBTC. By moving forward with this decision, Sky is reinforcing its commitment to safeguarding its ecosystem from potential risks and external threats.
With WBTC being phased out, the protocol is now exploring alternative wrapped Bitcoin solutions. In a proposal floated earlier in September, Sky listed Coinbase’s cbBTC and Threshold’s tBTC as potential substitutes for WBTC within its lending and borrowing markets.
These alternatives, proponents argue, provide a safer and more transparent framework for DeFi collateral use.
More DeFi Protocols to Follow Sky’s Move
Meanwhile, Sky is not the only DeFi protocol distancing itself from WBTC, LlamaRisk recently proposed in the AAVE community to reduce WBTC’s loan-to-value (LTV) ratio to zero, citing concerns over BitGo’s custody transfer of the asset.
However, Aave’s founder Stani Kulechov later clarified that this was only a proposal from a risk provider and not a decision by Aave itself to offboard WBTC.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
