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Sky, formerly known as Maker, has moved forward with its decision to offload its wrapped Bitcoin (WBTC) collateral following a governance vote. The decentralized finance (DeFi) platform, which specializes in lending and borrowing, concluded a three-day vote on September 19 with overwhelming community support.
The vote saw 88.17% of participants in favor, with 95,826 MKR tokens pledged for the proposal. While 11.83% abstained, there were no votes against it, although only 13 MKR whales participated.
Offloading WBTC
Sky plans to begin offloading WBTC in phases starting October 3, with the final phase set for November 28. The move comes in response to concerns raised by BA Labs, an advisor to the platform, regarding recent changes in the ownership and control of WBTC. BA Labs flagged the potential risks posed by Justin Sun or his affiliates, particularly in connection with their involvement with BitGo, the custodian holding the Bitcoin backing WBTC.
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The concerns stem from an August partnership between BitGo and BitGlobal, a company linked to Sun, the founder of Tron. The association sparked fears of counterparty risks, given Sun’s track record with other affiliated products. In a proposal put forth in mid-September, Sky’s team cited these risks as the reason for their decision to offboard WBTC from its non-custodial liquidity protocol, SparkLend, and Legacy Vaults.
Currently, SparkLend holds $61.38 million in WBTC-backed collateralized debts, and the platform is now considering alternative forms of wrapped Bitcoin for collateral. Coinbase’s cbBTC and Threshold’s tBTC are being explored as potential replacements, offering users a more secure option.
Meanwhile, Sky has faced massive backlash following the announcement of an upgraded stablecoin USDS with a so-called “freeze function.”
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A Broader Trend
Sky’s move is part of a broader trend in the DeFi space. On September 18, Aave, another major DeFi platform, saw a request for comment posted on its governance forum regarding its WBTC exposure. The proposal aimed to reduce Aave’s reliance on WBTC due to similar concerns about BitGo’s partnership with BitGlobal.
Aave founder Stani Kulechov clarified that the platform was not offboarding WBTC, but rather considering a proposal from one of its risk providers to limit the token exposure. Aave currently holds around $990 million in WBTC debt exposure.
As of now, the WBTC market has seen a significant decline, with its market cap standing at $9.6 billion—down nearly 40% from its peak in November 2021. Sky’s decision to offload wrapped bitcoin reflects growing caution in the DeFi industry as platforms reassess their collateral strategies.
