The combination of Justin Sun’s reputation and the existing troubles at Bitgo, Wrapped Bitcoin's (WBTC’s) custodian, is causing alarm within the crypto community. Many fear that this mix could lead to instability and credibility issues for the largest Bitcoin to Ethereum bridge.
This shift in sentiment comes after Bitgo, the custodian behind WBTC, announced its intent to transition the control of the WBTC product to a joint venture with BiT Global, linked to Justin Sun and Tron.
The planned changes involve expanding custody to locations like Hong Kong and Singapore, sparking unease among community members. A central concern is the potential for Justin Sun to exert significant influence over the venture managing WBTC.
The MakerDAO community was the first to react to the news, voting to limit the project's exposure to WBTC by capping borrowing against it on Maker and SparkLend platforms. Aave is also reportedly preparing to switch to Threshold Network’s TBTC, a bitcoin-collateralized token with only a $180 million market cap.
The concerns are fueled by previous experiences with projects associated with Sun, such as the TrueUSD (TUSD) stablecoin, which reportedly suffered from operational and transparency issues under his influence. Examples include the resignation of management, the suspension of real-time proof of reserves, and several significant disruptions in redemption services, leading to price instability.
Concerns also extend to Sun’s wider reputation and operational practices in other associated projects. Notable is the alleged replacement of Huobi’s USDT reserves with stUSDT, a project purportedly backed by U.S. Treasury bills but lacking transparent audit information.
In response to these concerns, Justin Sun defended the integrity of WBTC on X (formerly Twitter). He emphasized the continuity in the auditing and management processes of WBTC, asserting that all operations remain secure and transparent, managed by Bitglobal and Bitgo with safeguards akin to those previously in place.
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:
— H.E. Justin Sun 孙宇晨 (@justinsuntron) August 10, 2024
There have been no changes to WBTC compared to before. The audits are conducted in real-time and can be accessed via…
Bitgo CEO Mike Belshe also took the opportunity of an X Spaces discussion to reiterate the safety of the WBTC, confirming that Justin Sun does not have access to the cryptocurrency custodian's asset keys.
Meanwhile, Bitgo faces its own challenges, highlighted by a failed acquisition attempt by Galaxy Digital. The involvement of Justin Sun, known for stepping in during the financial troubles of crypto businesses, adds to the uncertainty surrounding the company.
At present, WBTC holds a significant position in the market as the largest synthetic Bitcoin by custody, with over 154,502 Bitcoins and a market cap exceeding $9 billion. Its pivotal role across DeFi and various exchanges underlines the potential impact of these unfolding events.
This situation has sparked initiatives among competitors hoping to capitalize on the uncertainties surrounding WBTC. A notable example is Coinbase, which recently hinted at its new synthetic Bitcoin product, cbBTC, which will soon enter the market.
The full impact of these controversies on WBTC’s market position is yet to be determined. We will Observe and report on the situation as it progresses.