Future of Solana's WBTC in Doubt Following BitGO, Justin Sun Controversy

A joint venture between wBTC custodian BitGo and Justin Sun-linked BitGlobal has sparked controversy across the cryptocurrency ecosystem.

Author: Finn Miller
Published: August 12, 2024 at 16:00
Updated: August 12, 2024 at 16:01

In a recent announcement, WBTC custodian BitGo proudly declared changes to its WBTC business. Aiming to diversify custody operations and cold storage across multiple jurisdictions, BitGo will be creating a joint venture with BitGlobal, a cryptocurrency exchange with strategic ties to Justin Sun and the Tron ecosystem.

The move has been heavily criticized by the wider crypto community, with long-standing DeFi players like MakerDAO proposing to restructure their WBTC exposure.

What could this mean for BTC-backed assets on Solana?

BitGO Announces Partnership

BitGo, a key WBTC custodian, announced on August 9th, that it would be joining forces with BitGlobal to develop the world’s first multi-jurisdictional and multi-institutional custody solution.

Promising improved security and decentralized custody operations, the transition is expected to last 60 days. Previously held entirely in the United States, the firm’s WBTC operations will now be diversified geographically to include Singapore and Hong Kong.

BitGo CEO Mike Belshe argues that given “the vast majority of WBTC usage is already in Asia,” the move is a natural progression and expansion for the company. Reinforcing this belief Belsch contends “with this partnership, the future of WBTC has never been brighter”.

However, the cryptocurrency community doesn’t share Belshe’s optimistic outlook. The move has been widely criticized due to BitGlobal’s strategic ties and involvement with Tron founder and controversial crypto mogul Justin Sun.

“Unacceptable Level of Risk” - MakerDAO Proposes Complete Exit from wBTC Collateral

Reaction to the announcement has been largely negative. Commentators and protocols across the blockchain industry have posited that Justin Sun’s involvement tarnishes WBTC's reliability and reputation.

In reaction to the announcement, DeFi stalwart MakerDAO has proposed a complete restructure of its wBTC exposure. Targeting the Sun’s poor management of the TUSD stablecoin, MakerDAO cites “market deterioration in operational processes and transparency… suspension of real-time proof of reserves, and several significant depegs” as sufficient evidence to suggest Sun’s involvement does not bode well for WBTC.

In an ongoing governance proposal, MakerDAO suggests decreasing all WBTC core vaults to 0, arguing that “Sun’s involvement as a controlling interest in the new WBTC joint venture presents an unacceptable level of risk.”

Taking to MakerDAO forums, Belshe acknowledges that BitGo anticipates the crypto community might react negatively to Justin Sun’s involvement. For this reason, BitGo opted to facilitate the changes over a 60 day period, giving the wider community “ample time (60 days) to discuss and do diligence before anything happens.”

Jupiter Co-Founder Meow Outlines Concerns

One of the founding team members who brought WBTC to life, Jupiter co-founder Meow highlighted concerns regarding the joint venture. While affirming his support for BitGo and claiming “they have been incredible custodians so far”, Meow raised several key questions about what the venture might mean for wBTC.

Namely, Meow inquired into which individuals and organizations were part of the multi-signature, what the BTC held in custody would be used for, and what BitGo and BitGlobal have to gain from the joint venture.

Conceding that Meow’s questions were valid, Belshe and Justin Sun have both committed to attending a public discussion where these concerns can be addressed. An official forum is yet to be announced.

“There have been no changes to wBTC” - Justin Sun Responds to Criticism

No stranger to controversy, Justin Sun was quick to clear the air. In response to the high frequency of critics arguing that Sun’s involvement was bad news for WBTC, Sun assured users that he had no control over any private keys or WBTC reserves.

Clarifying that his involvement in WBTC is “purely strategic”, Sun assures users that “There have been no changes to WBTC” and confirms that both BitGo and BitGlobal will not sign any unaudited transactions.

WBTC on Solana

Based on Step Finance data at press time, the Solana network currently hosts over $108M in WBTC. This represents 1.16% of WBTC's supply with approximately 1,801 WBTC in circulation on the chain, a figure that has consistently grown throughout 2024.

Bitcoin-backed assets have a rocky history on Solana. Following the collapse of soBTC in 2022 and the newfound controversy around WBTC, users may start looking into alternative BTC-pegged assets.

Managed by Threshold Network, tBTC is a similar alternative that has been proposed to replace WBTC in MakerDAO’s collateral vaults. After launching on Solana in August 2023, tBTC stands to witness more adoption across the crypto space if WBTC holders choose to migrate their wealth to alternative solutions.

Meanwhile, Solana-based protocols like Zeus Network are also developing a Bitcoin-Solana communication layer to facilitate greater interoperability between the two chains.