MakerDAO Flags Risks On Justin Sun’s Role in WBTC Custody Changes

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MakerDAO Flags Risks Justin Sun's Role in WBTC Custody Changes NEW

MakerDAO, a prominent player in the decentralized finance (DeFi) sector, is assessing the impact of the upcoming Wrapped Bitcoin (WBTC) custody shifts on its risk management framework.

Due to BitGo, a major WBTC custodian, recent statement that it would transfer the control of the product to a new joint venture with BiT Global, the governance-focused DAO has adopted a rather conservative approach.

MakerDAO Flags Risks Justin Sun’s Role 

MakerDAO is considering several measures to minimize risks related to changes in Wrapped Bitcoin custody. This review follows an update from BitGo, the current custodian of the product, on the transfer of control and operational jurisdictions.

This change is partly due to collaboration with Justin Sun and the Tron ecosystem, which now will bring Sun’s level of control and influence over the joint venture that will regulate WBTC. Since Sun has had previous associations with other crypto projects, including TUSD and Huobi’s USDT reserves, which faced some operational and transparency problems, the community has raised its concerns.

Given these developments, the firm is currently considering possible measures to mitigate risk for its platform and its users. The governance activities on-chain and off-chain reflect a rather conservative attitude towards the process. At the same time, there is a suggestion to reduce the share in the firm’s vaults significantly.

This entails potentially setting the debt ceilings on various collateral integrations, for instance, WBTC-A, B, and C, to zero until the future of custodial frameworks is more clearly understood.

Additionally, there is a suggestion to cease the products borrowing on SparkLend, another service linked to the firm, and to decrease the LTV ratio to 0%. These proposed actions highlight the efforts being made by the firm in this regard, showing that risk management is a crucial aspect of DeFi. However, final decisions are expected to be made during the next week’s executive vote.

BitGo Transition of Wrapped Bitcoin Custody

This MakerDAO response follows BitGo’s recent announcement of transferring ownership of the product to a new joint venture with BiT Global. This strategic change will involve the custody being shared across different jurisdictions, such as Hong Kong and Singapore, as opposed to the current United States-based custody.

The transition is expected to be finalized within the next 60 days, which will be a major change in the operational environment of WBTC.

In line with these shifts, BitGo has received the Major Payment Institution License from the Monetary Authority of Singapore (MAS). This approval significantly expands BitGo’s regulated services in Asia and strengthens the company’s reputation as a reliable provider of digital asset management solutions in light of the restructuring of operations.

Concurrently, Wrapped Bitcoin price has been in a bullish rally in the last 24 hours with the price swaying between an intra-day high and low of $61,153.79 and $60,176.32, respectively. At press time the the price was exchanging hands at $60,960, a 0.90% surge from the support level.

The post MakerDAO Flags Risks On Justin Sun’s Role in WBTC Custody Changes appeared first on CoinGape.

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