- Justin Sun’s strategic move towards WBTC is causing concern.
- A few hours later, there was no significant impact on WBTC’s TVL or flows.
Trons founder Justin Sun has made headlines after his involvement in the custody operations of Wrapped Bitcoin (WBTC). His company, BiT Global, has done just that partnered with BitGo, to achieve “first multi-jurisdictional and multi-institutional custody.”
However, the partnership has raised concerns about decentralization among community members, prompting the executive branch to respond and defend itself. Part of Sun’s statement read,
‘My personal involvement with WBTC is purely strategic. I have no control over the private keys of the WBTC reserves and cannot move any BTC reserves.”
Sun added that
“But my goal with all these relationships is to promote projects that focus on decentralization, security protocols and safety. WBTC is a critical part of the defi ecosystem, and I look forward to ensuring it stays that way!”
Response to Justin Sun’s WBTC movement
For perspective, WBTC is one of the largest DeFi collateral tokens. It is backed 1:1 with Bitcoin to bring the liquidity of BTC within Ethereum’s DeFi ecosystem.
Following The Sun’s partnership with WBTC, a major creator of DeFi players marked the move as a risk.
“We believe that Sun’s involvement as a controlling interest in the new WBTC joint venture poses an unacceptable risk.”
Maker cited a lack of transparency in Sun’s other projects, including Huobi’s USDT reserves. Additionally, the company labeled BitGo as a counterparty risk following the recent failed acquisition of Galaxy Digital.
As a result, Maker considered removing WBTC from its platforms unless BitGo assured that the new partnership would be secure.
“We will consider further recommendations for parameter changes to protect the protocol and mitigate counterparty risk, up to and including possible full offboarding of all Maker and Spark WBTC collateral integrations.”
However, in a rejoinder, BitGo CEO Mike Belshe said rejected Maker’s concerns, stating that it is “a response to Justin Sun and not facts.”
“This seems more a reaction to the name Justin Sun than to facts.”
For his part, Wormhole co-founder Dan Reecer bumped players to opt for decentralized packaged BTC with decentralized custodians.
‘Another example of how decentralization is only a priority when there is a wake-up call.’
So were the decentralized, wrapped BTC calls echoed by Austin Federa, Strategy Manager at Solana Foundation.
‘Decentrally packaged bitcoin is desperately needed. It’s strange that we’re fifteen years into the Bitcoin revolution and still have to rely on centralized custodians.”
State of WBTC
Source: DeFillama
At the time of writing, WBTC had $9.4 billion in cash TVL (total value locked). A few hours after concerns were raised about Sun’s involvement, there was no sign of a sharp decline in TVL or outflows.