Sky votes to remove wBTC collateral

Decentralized finance (DeFi) protocol Sky (formerly Maker) is moving forward with a plan to remove WBTC collateral from the platform. In a three-day governance vote that ended on September 19, Sky officially approved the removal of its exposure to wBTC. This vote received overwhelming support from the Sky community, with 88.17% of voters in favor of the proposal, no objections but 11.83% of voters abstaining, and a total of 95,826 MKR votes in support. However, only 13 MKR whales participated in the voting.

Sky plans to remove WBTC in multiple phases, with the first phase starting on October 3 and the final phase completing on November 28. SparkLend, Sky’s decentralized uncustodial liquidity protocol, currently still has $61.38 million in wBTC collateralized debt.

BA Labs, an advisor to the DeFi protocol, expressed concerns about WBTC in August. On September 12, the team launched a proposal to delist WBTC from SparkLend and Legacy Vaults, noting that “recent changes in ownership and control of wBTC may involve Justin Sun or his affiliates,” which brought about “a situation based on past records. Significant Counterparty Risk".

According to previous reports by Zombit, BitGo, the Bitcoin custodian behind wBTC, announced in August that it would transfer its WBTC business to a multi-jurisdictional joint venture established in cooperation with Hong Kong-based custodian BiT Global (the owner behind which is Justin Sun), forming BitGo, The “strategic partnership” between the Tron blockchain ecosystem and Tron founder Justin Sun has raised concerns.

Coinbase’s cbBTC takes advantage of chaos to rise

In the meantime, Sky is considering Coinbase’s cbBTC and Threshold’s tBTC as alternative collateral for wBTC, according to a proposal in early September.

According to data from CryptoQuant, cbBTC issued by Coinbase has accumulated nearly 2,000 circulating tokens in just one week since its launch, becoming the third largest packaged Bitcoin token. Despite this, wBTC still dominates the market for wrapped Bitcoin, with nearly 153,000 coins currently in circulation and a market capitalization of approximately $9.6 billion, far outpacing its closest competitor tBTC, which only has around 3,400 coins.

Will other DeFi follow suit?

Sky is not the only DeFi platform that wants to cut ties with WBTC. On September 18, a request for comment was posted on the Aave governance forum proposing to reduce exposure to wBTC. Similar to Sky, Aave expressed the same concerns about BitGo:

“While we are still communicating with BitGo to try to understand BIT Global’s compliance status, we remain skeptical about the prospects of this partnership and its impact on WBTC’s transparency standards and future user guarantees.”

However, Aave founder Stani Kulechov emphasized on the X platform that Aave is not delisting WBTC. This is just a risk provider's proposal to limit WBTC's exposure. Aave currently has approximately $990 million in WBTC debt exposure, according to ChaosLabs.

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