MakerDAO Stops WBTC-Backed Lending for Good

MakerDAO, a leading decentralized finance (DeFi) organization, has approved a proposal to halt new loans backed by Wrapped Bitcoin (WBTC) issued by BitGo. An executive vote upheld the decision that lowered the debt ceiling for WBTC to zero. This effectively prevents new loans from being created with this type of collateral.

Additionally, MakerDAO has adjusted the loan-to-value (LTV) ratio of WBTC to 0%. This means that it will no longer be possible to use WBTC as collateral for the issuance of new DAI, the decentralized stablecoin issued by the platform. However, this change does not affect existing loans backed by WBTC. After all, the liquidation threshold remains the same.

MakerDAO made this decision after BitGo, the company responsible for the creation and custody of WBTC, announced a partnership with BiT Global, an entity linked to the controversial founder of Tron, Justin Sun.

The partnership will shift custody of WBTC from being concentrated in the United States to being distributed across multiple jurisdictions, including Hong Kong and Singapore. This change has raised concerns about security and the risk of centralized control, prompting MakerDAO contributors to seek greater protection for the protocol.

MakerDAO ‘cuts ties’ with WBTC in search of protection

Justin Sun’s reputation, which has been embroiled in several controversies in the crypto market, has contributed to the growing concern. While the custody change has raised concerns among members of the MakerDAO community, BitGo CEO Mike Belshe has spoken out to reassure users.

He highlighted the company’s commitment to the security and legal oversight of both BitGo and BiT Global, assuring that it is implementing appropriate measures to ensure the protection of assets.

This decision represents an attempt by MakerDAO to mitigate risks at a time of growing uncertainty in the cryptocurrency market. By adjusting WBTC’s risk parameters, the platform seeks to preserve DAI’s stability and protect its system from potential threats.

The MakerDAO community continues to monitor developments related to WBTC and asset custody in an ongoing effort to ensure the safety and trust of users in the protocol.

The MaketDAO protocol’s native MKR token has fallen 3.6% in the past 24 hours in line with the rest of the crypto market. According to data from CoinGecko, at the time of writing, the token is priced at $1,961.

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