Table of Contents

• Sky Votes to Remove wBTC Collateral
• Coinbase's cbBTC Seizes the Opportunity
• Will Other DeFi Platforms Follow Suit?

Sky Votes to Remove wBTC Collateral

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

Sky plans to remove WBTC in multiple phases, with the first phase starting on October 3 and the final phase concluding on November 28. Sky's decentralized, non-custodial liquidity protocol SparkLend currently holds $61.38 million in wBTC collateral debt.

BA Labs, an advisor to the DeFi protocol, expressed concerns about WBTC in August. On September 12, the team initiated a proposal to delist WBTC from SparkLend and Legacy Vaults, citing "recent changes in wBTC ownership and control, potentially involving Justin Sun or his associated companies," posing "significant counterparty risk based on past track records."

According to a previous report by Zombit, BitGo, the bitcoin custodian behind wBTC, announced in August that it would be transferring its wBTC operations to a multi-jurisdictional joint venture formed with BiT Global, a custodian headquartered in Hong Kong (owned by Justin Sun). This formed a "strategic partnership" between BitGo, the Tron blockchain ecosystem, and Tron founder Justin Sun, raising concerns.

Coinbase's cbBTC Seizes the Opportunity

Meanwhile, Sky is considering Coinbase's cbBTC and Threshold's tBTC as alternative collateral for wBTC, as outlined in a proposal from early September.

According to data from CryptoQuant, Coinbase's cbBTC has accumulated nearly 2,000 circulating tokens in just a week since its launch, making it the third-largest wrapped bitcoin token. However, wBTC still dominates the wrapped bitcoin market, with nearly 153,000 circulating tokens and a market capitalization of approximately $9.6 billion. This significantly surpasses its closest competitor, tBTC, which has only about 3,400 tokens.

Will Other DeFi Platforms Follow Suit?

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

"While we are still in communication with BitGo to understand the compliance status of BIT Global, we remain skeptical about the prospects of this partnership and its impact on the transparency standards and future user guarantees for WBTC."

However, Aave founder Stani Kulechov emphasized on X (formerly Twitter) that Aave is not planning to delist WBTC. This was simply a proposal from a particular risk provider to limit exposure to WBTC. According to data from ChaosLabs, Aave currently has approximately $990 million in WBTC debt exposure.