MakerDAO Sets WBTC Debt Ceiling to Zero Amid BitGo Security Concerns
MakerDAO Sets WBTC Debt Ceiling to Zero Amid BitGo Security Concerns MakerDAO halts new WBTC loans, setting debt ceiling to zero amid BitGo’s partnership with BiT Global and concerns over Justin Sun’s influence. MakerDAO governance has finally decided the use of Wrapped Bitcoin (WBTC) as collateral. In a vote, the MakerDAO community agreed to set the WBTC debt ceiling to zero. This means that no new loans backed by WBTC can be issued. The loan-to-value (LTV) ratio for WBTC has also been set to 0%. This move comes amid questions over the security of WBTC given that BitGo, the custodian of WBTC, has entered into a new partnership with BiT Global that has links with Justin Sun. The latest Executive Vote has been approved by Maker Governance.→ https://t.co/Y968n3VZW6The following changes were executed within the Maker Protocol on August 15th at 13:24 UTC:📊 WBTC Vault Debt Ceiling Reductions• WBTC-A, WBTC-B, and WBTC-C were removed from the… pic.twitter.com/kJHaWY3tEt— Maker (@MakerDAO) August 15, 2024However, the decision does not impact the existing WBTC-backed loans in any way. The current positions liquidation threshold remains unchanged. Consequently, borrowers with outstanding loans will not face an immediate threat to their collateral. This policy ensures no new loans are provided against the WBTC while the existing ones are not to be affected. MakerDAO Concerns Over BitGo’s Partnership The community decided to suspend new WBTC-backed loans after BitGo disclosed its plans to move WBTC custody. This move was from the United States to Singapore and Hong Kong as part of its collaboration with BiT Global. The partnership raised eyebrows owing to the controversies that have surrounded Sun and the possibility of controlling WBTC custody. Consequently, concerns were raised that it could pose new risks to the ecosystem, which led to the recent governance vote. To this effect, BitGo’s CEO, Mike Belshe, has tried to soothe these fears with the following statements. In a chat, he stressed neither Justin Sun nor any other party would have control over the WBTC assets. According to him, the keys would be distributed between BitGo’s entities in the U.S. and Singapore and BiT Global. However it did not completely assuage the anxiety within the MakerDAO community, and as a result, new borrowing against WBTC was to be discontinued. Focus on Stability and Security in DeFi By this decision, MakerDAO has provided a way of dealing with risk in the decentralized finance (DeFi) environment. With the new debt ceiling, MakerDAO seeks to shield its community from risks that could be posed by shifts in WBTC’s custodianship. This decision is consistent with the commitment to preserving the stability and security of the lending process of Maker, including the proper evaluation of collateral. At the same time, Grayscale Investments revealed the launch of the Grayscale MakerDAO Trust. This move allows investors to invest in the governance token of MakerDAO, MKR. This move shows more attention being paid to MakerDAO’s ecosystem that consists of an on-chain credit protocol and the DAI stablecoin. This decision by Grayscale is an indication of the growing interest in decentralized finance (DeFi) assets among institutional investors.