Cryptocurrency custody company BitGo has announced the transition of its WBTC operations to the world’s first multi-jurisdictional and multi-agency custody service, an upgrade made possible through a unique partnership and joint venture with BiT Global. Under this partnership, BitGo will become a minority shareholder in the new joint venture.

However, this has also caused concern in the DeFi community. The MakerDAO community has proposed to prevent Justin Sun’s BiT Global from causing risks to WBTC, so it proposed to lower the WBTC debt limit to zero.

BitGo: Strengthen WBTC security and expand global business scope

BitGo’s move aims to improve the security of WBTC operations by decentralizing custody jurisdictions and the storage locations of the underlying Bitcoins. Previously, these assets were mainly stored in the United States. Following the upgrade, WBTC’s operations will be diversified geographically and across jurisdictions, including places such as Hong Kong and Singapore.

Introduced BiT Global joint venture of Sunge Company

BitGo stated that BiT Global is a global custody platform with legal operations registered as a trust and company service provider (TCSP) in Hong Kong. This collaboration is part of a strategic partnership between BitGo, Justin Sun and the Tron ecosystem.

BitGo: Will maintain transparency

BitGo said the joint venture will continue to use the same BitGo multi-signature technology and deep cold storage. The only change is that keys can now be dispersed across multiple locations around the world. BitGo and BiT Global will continue to provide real-time proof of reserves via https://wbtc.network. This upgrade will take effect in 60 days.

Lessons from TUSD: Community concerns about Justin Sun’s involvement

The BA Labs Team, which proposed on the MakerDAO forum to guard against changes to WBTC, said the transition was reminiscent of the previous situation involving the TUSD stablecoin, when control was handed over to Justin Sun. Since then, TUSD has experienced significant operational challenges, including reduced transparency, management resignations, suspension of real-time reserve certifications, and multiple decouplings due to disruptions in redemption services. Additionally, other Sun-related projects have raised red flags, such as Huobi’s USDT reserves being replaced by stUSDT (a project controlled by Justin Sun), which claims to hold U.S. Treasuries but has yet to provide a clear audit or evidence. Justin Sun’s involvement in the WBTC joint venture has raised concerns about potential risks and the future stability of WBTC.

Bitgo’s woes: A sign of financial troubles?

Bitgo’s recent activity has also added to concerns. The acquisition of Galaxy Digital fell through, with Galaxy abruptly exiting the deal for undisclosed reasons, casting a pall over Bitgo's financial stability. Coupled with the sudden decision to exit the WBTC product, these developments may indicate financial distress within Bitgo. These signs raise concerns about Bitgo’s risk as a counterparty, given WBTC’s critical role in the decentralized finance (DeFi) ecosystem.

Recommended Action: Reduce Risk for Maker and SparkLend

In light of these developments, BA Labs has warned of the integration risks of using WBTC as collateral on platforms such as Maker and SparkLend. To mitigate these risks, BA Labs recommends immediate action by urging the Stability Coordinator to propose the following measures in an executive vote on Monday, August 12:

  • Core Vault:

  • Lower the WBTC-A debt ceiling (DC-IAM line) from $500 million to 0.

  • Lower the WBTC-B debt ceiling (DC-IAM line) from $250 million to 0.

  • Lower the WBTC-C debt ceiling (DC-IAM line) from $500 million to 0.

  • SparkLend：

  • Disable WBTC lending completely.

  • Reduce WBTC’s loan-to-value ratio (LTV) from 74% to 0%.

These recommendations are intended to limit the growth of WBTC exposure until Bitgo or another responsible party can provide compelling evidence that the current collateral aggregation is safe. BA Labs warned that if these guarantees fail to materialize, further action may be required, including the potential complete delisting of all WBTC collateral in Maker and SparkLend, to protect the protocol from counterparty risk.

WBTC’s future is unclear

As the DeFi community prepares for these changes, the focus will be on how Bitgo and Justin Sun handle the transition. The stability of WBTC and the potential impact on the broader DeFi ecosystem remains uncertain, but the cautious steps proposed by BA Labs underscore the importance of risk management in this evolving environment.

This article, Brother Sun’s entry into WBTC, causes concern! BitGo and BiT Global reach a new cooperation, MakerDAO proposal starts risk control appeared first on Chain News ABMedia.