MakerDAO Considers Offboarding WBTC as BitGo Plans Custody Changes

MakerDAO’s risk unit BA Labs proposed removing WBTC integrations on Maker and SparkLend, citing BitGo’s upcoming plans to split custody across multiple jurisdictions.

MakerDAO, the DeFi giant behind the DAI stablecoin, is weighing a proposal to reduce its exposure to Wrapped Bitcoin (WBTC) from the core lending engine and its money market protocol.

A team of risk analysts at BA Labs floated a proposal to change protocol parameters to reduce WBTC exposure to zero in its core vaults, disable WBTC borrowing and bring Loan-to-Value (LTV) ratio on SparkLend down to zero. 

The proposal cited BitGo’s upcoming planned changes to custody, which would move the custody of its WBTC business outside the U.S. alone, to Singapore and Hong Kong. The changes are set to take place in two months, and are part of a strategic partnership between BitGo, Justin Sun, and the Tron ecosystem.

“Given the upcoming change in control, BA Labs believes WBTC collateral integrations on Maker and SparkLend present an elevated level of risk,” said BA Labs.

The BA Labs team also pointed specifically to Sun’s involvement as a motivating factor behind the decision, drawing parallels to his control of TUSD and the stablecoin’s subsequent market deterioration. 

“On the whole, we find that Sun’s involvement as a controlling interest in the new WBTC joint venture presents an unacceptable level of risk,” said the BA Labs team. 

“We also note that Bitgo itself seems to have had some negative developments recently, including a failed acquisition by Galaxy Digital where Galaxy backed out for undisclosed reasons.”

BitGo CEO Mike Belshe dismissed the notion that Sun’s involvement should be a cause for alarm, while noting that the BitGo had anticipated it would invoke this kind of reaction from parties, prompting them to be upfront about his involvement.

“This seems to be more a reaction to the Justin Sun name than to facts,” said Belshe.

“I’d encourage you to meet with the BiTGlobal team to hear how the custody will be secured along with BitGo.”

Maker governance delegate GFX labs also suggested that ending support for WBTC was an “extreme reaction” to the issue at hand.

However, developers of other wrapped versions of Bitcoin saw it as an opportunity to pitch their own product as a solution.