MakerDAO assesses the risk associated with the recent shifts in WBTC custody due to Justin Sun’s role in the BitGo and BiT Global joint venture.
MakerDAO, a prominent entity in the decentralized finance (DeFi) sector, is evaluating the potential effects of the forthcoming Wrapped Bitcoin (WBTC) custody shifts on its risk management framework.
The governance-focused DAO has adopted a rather conservative approach in response to BitGo’s recent announcement that it would transfer the control of the product to a new joint venture with BiT Global, a significant WBTC custodian.
MakerDAO indicates Risk to Justin Sun’s Role
MakerDAO is contemplating various strategies to mitigate the risks associated with modifications to Wrapped Bitcoin custody. Following an update from BitGo, the current custodian of the product, regarding the transfer of control and operational jurisdictions, this review is being posted.
This modification is partially attributable to the Tron ecosystem and Justin Sun’s role, which will now enhance Sun’s control and influence over the joint venture regulating WBTC. Sun has previously been associated with other crypto initiatives, such as TUSD and Huobi’s USDT reserves, which encountered operational and transparency issues. Consequently, the community has expressed its apprehensions.
The company is presently evaluating potential strategies to reduce the risk to its platform and its users in light of these developments. The governance activities, both on-chain and off-chain, demonstrate a relatively conservative approach to the process. Simultaneously, a recommendation is recommended to diminish the firm’s vault holdings substantially.
This could involve the potential reduction of the debt ceilings on various collateral integrations, such as WBTC-A, B, and C, to zero until the future of custodial frameworks is more clearly defined.
Furthermore, there is a recommendation to discontinue the financing of products on SparkLend, an additional service associated with the organization, and to reduce the LTV ratio to 0%. These proposed actions underscore the firm’s endeavors in this area, demonstrating that risk management is an essential component of DeFi. Nevertheless, the executive vote scheduled for the following week is anticipated to result in a definitive decision.
BitGo Transition of Wrapped Bitcoin Custody
MakerDAO’s response to BitGo’s recent announcement regarding the transfer of product proprietorship to a new joint venture with BiT Global is as follows. In contrast to the current United States-based custody, this strategic change will entail sharing custody across various jurisdictions, including Singapore and Hong Kong.
The operational environment of WBTC is anticipated to undergo a significant transformation, as the transition is anticipated to be completed within the next 60 days.
BitGo has been granted the Major Payment Institution License by the Monetary Authority of Singapore (MAS) per these changes. In light of restructuring operations, this approval substantially broadens BitGo’s regulated services in Asia and fortifies the company’s reputation as a dependable provider of digital asset management solutions.
Simultaneously, the price of Wrapped Bitcoin has been experiencing a favorable rally over the past 24 hours, fluctuating between an intra-day high of $61,153.79 and a low of $60,176.32. The price was trading at $60,960 at the time of publication, representing a 0.90% increase from the support level.
