In a significant move within the DeFi landscape, MakerDAO has made a bold decision to halt new loans backed by wrapped Bitcoin (WBTC). This action follows recent security concerns surrounding BitGo, the custodian responsible for WBTC, and could have far-reaching implications for users and investors engaged with Maker’s ecosystem.
MakerDAO’s New Policy on WBTC Loans
In a recent executive vote, MakerDAO contributors approved a proposal to suspend borrowing against BitGo’s wrapped Bitcoin, effectively reducing the WBTC debt ceiling to zero DAI. This means that no new loans will be permitted using WBTC as collateral.
- Debt Ceiling Reduction: The debt ceiling for WBTC was lowered to 0 DAI, prohibiting any new loans secured by WBTC collateral.
- Loan-to-Value (LTV) Ratio Update: The LTV ratio for WBTC has been set to 0%, affecting any potential new loans.
These adjustments are particularly notable, as they allow MakerDAO users to mint the DAI stablecoin through overcollateralized loans. Importantly, it’s worth mentioning that existing loans backed by WBTC remain unaffected, given that their liquidation thresholds stay consistent.
Origin of the Decision
The decision to adjust the risk parameters for WBTC stems from a partnership announcement made by BitGo. The company, known for its role as custody provider for wrapped Bitcoin, indicated its collaboration with BiT Global, an entity connected to Tron founder Justin Sun. This partnership involves a shift of custody from the U.S. to multiple jurisdictions, including Hong Kong and Singapore.
The implications of this strategic move raised alarms among MakerDAO contributors due to concerns regarding potential centralization of custody and security, given Sun’s controversial track record.
BitGo’s Assurance
In response to these apprehensions, BitGo’s CEO, Mike Belshe, reassured stakeholders of the firm’s unwavering commitment to security and the stringent legal oversight that both BitGo and BiT Global adhere to. This effort aims to quell fears regarding the management of WBTC and its implications for users within the Maker ecosystem.
As MakerDAO adjusts its practices in an ever-evolving crypto market, the recent halt on WBTC-backed loans serves as a poignant reminder of the importance of security and governance in decentralized finance. Makers and users alike will be watching closely as the implications of this decision unfold.
