MakerDAO Halts New Loans as Crypto Investors Redeem $30M WBTC
In a surprising turn of events, MakerDAO, the decentralized autonomous organization behind the DeFi protocol Maker, has approved a proposal to halt new borrowing against BitGo’s wrapped Bitcoin (WBTC). This decision comes as the crypto community is left uneasy with Justin Sun’s involvement with the WBTC custody.
The Move to Halt New Loans
On Aug. 15, MakerDAO announced that it was reducing the debt ceiling for all WBTC vaults to zero. This move effectively prevents any new borrowing from these vaults and lowers WBTC’s loan-to-value (LTV) ratio on SparkLend to 0%. The protocol outlined the changes, stating: “WBTC-A, WBTC-B, and WBTC-C have been removed from the Debt Ceiling Instant Access Module (DC-IAM). The debt ceilings for WBTC-A, WBTC-B, and WBTC-C are now set to 0 DAI.”
It’s important to note that these changes will not affect existing borrowing positions within the Maker Protocol’s core WBTC vaults and SparkLend. Etherscan data shows that two of Maker’s smart contracts are among the top ten largest holders of WBTC, with more than 6,600 WBTC tokens valued at nearly $380 million.
Reasoning behind the Decision
MakerDAO’s decision to remove WBTC is closely tied to recent community concerns over Justin Sun’s involvement with the digital asset. Last week, BitGo announced a partnership involving Sun and BiT Global to manage WBTC custody. This move shifted custody from the United States to multiple jurisdictions, including Hong Kong and Singapore.
Following this announcement, several crypto stakeholders, including MakerDAO contributors, expressed concerns about the security of the tokens and Sun’s involvement with the project. However, BitGo CEO Mike Belshe emphasized that Sun has no influence over the tokens and assured that the crypto entrepreneur had no access to the crypto custodian’s asset keys.
Crypto Investors React
Despite assurances from BitGo, crypto investors have been reducing their exposure to WBTC by burning and redeeming their assets. According to on-chain data, approximately 575 WBTC, worth over $30 million, have been burned during the last seven days, with crypto exchange Crypto.com and Galaxy Digital leading the charge.
In contrast, WBTC’s rivals, like tBTC, have seen a growth in their numbers. According to the Dune Analytics dashboard, tBTC holders surpassed 1,000 during the past week, while its total supply stood at 3,107.36 tBTC as of press time, equivalent to more than $180 million. Additionally, Coinbase has hinted at launching its own wrapped Bitcoin product soon.
Conclusion
The decision by MakerDAO to halt new loans against WBTC has sparked a wave of reactions within the crypto community. As concerns over Justin Sun’s involvement continue to linger, crypto investors are taking action by redeeming their WBTC assets. This move has also led to increased interest in WBTC’s competitors, such as tBTC. Only time will tell how these developments will shape the future of the crypto market.
