Tron’s founder Justin Sun has hit headlines following his involvement with Wrapped Bitcoin (WBTC) custody operations. His firm, BiT Global, has partnered with BitGo, to drive “first multi-jurisdictional and multi-institutional custody.”
BitGo is pleased to announce the move of its WBTC business to the world’s first multi-jurisdictional and multi-institutional custody via a unique partnership and joint-venture with BiT Global.
This upgrade will occur 60 days from today with no disruption or interruptions to… pic.twitter.com/yNUoyTwsqL
— BitGo (@BitGo) August 9, 2024
However, the partnership has raised decentralization concerns among community members, prompting the executive to respond and defend himself.
Part of Sun’s statement read,
“My personal involvement in WBTC is entirely strategic. I do not control the private keys to the WBTC reserves and cannot move any BTC reserves.”
Recently, I've heard that the community has some concerns about my involvement in various projects, including WBTC. I would like to clarify the following points:
There have been no changes to WBTC compared to before. The audits are conducted in real-time and can be accessed via…
— H.E. Justin Sun 孙宇晨 (@justinsuntron) August 10, 2024
Sun added that,
“But my goal with all these relationships is to promote projects dedicated to decentralization, security protocols, and safety. WBTC is a critical part of the DeFi ecosystem, and I look forward to ensuring it continues to be!”
Reaction To Justin Sun’s WBTC Move
For perspective, WBTC is one of the largest DeFi collateral tokens. It’s backed 1:1 with Bitcoin to bring BTC’s liquidity within Ethereum’s DeFi ecosystem.
Following the Sun’s partnership with WBTC, a key DeFi player Maker flagged the move as a risk.
“We find that Sun’s involvement as a controlling interest in the new WBTC joint venture presents an unacceptable level of risk.”
Maker cited a lack of transparency in other Sun’s projects, including Huobi’s USDT reserves. Additionally, the firm labeled BitGo a counter-party risk after Galaxy Digital’s recent failed acquisition.
As a result, Maker was mulling delisting WBTC from its platforms unless BitGo assured that the new partnership would be safe.
“We will consider further recommendations for parameter changes to protect the protocol and mitigate counterparty risks, up to and including potential full offboarding of all Maker and Spark WBTC collateral integrations.”
However, in a rejoinder, BitGo CEO Mike Belshe dismissed Maker’s concerns, stating that they are “reaction to Justin Sun and not facts.”
“This seems to be more a reaction to the Justin Sun name than to facts.”
On his part, Wormhole co-founder Dan Reecer nudged players to opt for decentralized wrapped BTC with decentralized custodians.
“Another example of decentralization not being a priority until there’s a wakeup call.”
The decentralized wrapped BTC calls were also echoed by Austin Federa, Strategy executive at Solana Foundation.
“Decentralized wrapped bitcoin is badly needed. It’s wild we’re 15 years into the Bitcoin revolution and still have to trust centralized custodians.”
At the time of writing, WBTC had $9.4 billion in TVL (total value locked). A few hours after concerns were raised about Sun’s involvement, there was no sign of a steep decline in TVL or outflows.
