BitGo will expand the management and ownership of wrapped bitcoins (WBTC) worth $9.2billion to two additional entities in Hong Kong, Singapore. This expansion is expected to take place within two months.
The company said on Saturday it would change its WBTC products legal custody to a “multi-jurisdictional and multi-institutional” Joint venture with BiT Global, as part of the strategic partnership between Justin Sun and Tron.
MakerDAO’s reaction to Sun’s participation in the new venture prompted a response from MakerDAO. The company immediately began a discussion about governance on Monday, aiming at eliminating WBTC from DAI. Makerburn reports that WBTC makes up about 3% of DAI’s backing collateral ($155m).
On Thursday, the resulting Executive vote was passed.
“We can infer that Justin Sun will have significant influence or control over the joint venture managing WBTC,” Block Analitica was written by a team of risk managers at Maker.
BitGo CEO Mike Belshe said that WBTC’s multi-signature technology and cold storage will be the same in an X Space hosted on Tuesday.
“The technology that’s being used is the exact same technology that’s used today on a go-forward basis,” Belshe stated.
BitGo has 154 266 bitcoins under custody.
BitGo Trust Company utilizes a two-of-three multisignature model. BitGo currently holds the three private key in the US and requires two people to sign off on the burning or minting of WBTC. Belshe said that although it may seem like not much, the processes are in place to ensure each key is secure.
“So even though you only have three keys that I’ve listed here, the protections on each of those keys still make it so that no single person can access even one of those keys,” “He said”
BiT Global will receive one of the private keys under these changes. BiT Global, a TCSP registered in Hong Kong and a regulated Trust and Company Service Provider is a TCSP. BitGo retains the two remaining keys. One will remain in US, while the second will be under BitGo Singapore Ltd.
Belshe said that two parties would verify BTC deposit received before co-signing a WBTC Mint transaction on Ethereum.
He said that the freeze rights for WBTC would be decentralized across different jurisdictions, which could protect the asset against a crackdown by regulators.
Meow was part of WBTC’s founding team and the co-founder Jupiter. He has praised BitGo in the past for their transparency.
Meow was skeptical about the claim that decentralization would be improved by the new system. BiT Global was rumored to hold a second conference. “backup” Key, which could allow it to reach the threshold of two thirds on its own.
The Hong Kong authorities can theoretically take control of both keys that BiT Global holds.
Belshe’s response was that the regulators must work together and it is unlikely for any jurisdiction to be able to unilaterally act.
“There’s no freaking way that one regulator is just going to kowtow to the other one without a lot of conversation,” “He said”
Belshe explained that BitGo is already used by merchants outside the United States who have issued mint/burn request.
BitGo stated in a post on X that they intend to separate the keys, so BiT Global does not hold two.
“To address those concerns, the 3rd key will not be held with BiT Global; and will instead be stored in BitGo Singapore Ltd.” This is what the company wrote.
Blockworks tried to contact BitGo for clarification on how to generate new multisig signature keys to guarantee independence and security between multiple parties but had not heard back at the time of publication.
Belshe said that new arrangements are still in the works.
“I think the key that we want is to make sure that we’re constantly progressing towards more decentralization, less concentration of power,” Belshe spoke.
Rob Liu is the director of BiT Global and he has highlighted their fiduciary responsibility in Hong Kong.
“BiT Global is structured as a public holding company under the Hong Kong statutory framework. We enter the regulation as TCSP license holder — what that means is we are in a fiduciary duty to make sure that customer assets are safeguarded according to law and not subject to arbitrary use by anybody,” Liu noted.
Meow wanted to know how participants in the marketplace could have confidence in BiT Global’s operating processes.
“From the outside looking in, there’s actually no way to ascertain how good the processes of BiT Global are in terms of custody and everything,” “He said”
Belshe claimed BitGo uses the same technology as Belshe “has been cloned” BiT Global.
Belshe stated during the X Space that Sun wasn’t an employee of BiT Global, and under Hong Kong Law, a single individual is not allowed to own more than 20% in a company.
Sun, the person on the phone, remained mostly quiet. He interrupted the conversation at the very end. “our top priority is to protect the community and protect the users.”
The horizon is full of competitors
Dune data shows that BitGo WBTC is the dominant bitcoin DeFi on Ethereum market today. It has a marketshare of 98.8%. The public’s dismay at BitGo may allow others to take advantage of the opportunity to be adopted.
Coinbase could be developing a WBTC-like competitor. In a series of tweets on Wednesday, the exchange hinted at launching a potential WBTC competitor. “cbBTC” You can learn more about it here. “Coming Soon.”
Projects like dlcBTC that use Bitcoin’s Tapscript are now available to offer non-custodial options to get bitcoin on Ethereum.
Wrapped Bitcoin is also becoming increasingly useful. Liquid restaking token (LRT) specialists Swell has recently introduced swBTC, a Bitcoin LRT that wraps WBTC — with BitGo’s blessing — to offer new avenues for holders to earn yield via restaking.
Launched by Symbiotic (formerly EigenLayer), Karak and Symbiotic as a way to provide economic security for these networks and possibly from future DeFi strategies, the swBTC yield will be given in return for the exchange of economic security and potential DeFi strategies.
Swell will soon add native BTC Swaps through THORChain. Users can now deposit WBTC in order to receive swBTC. Swell is launching swBTC to join other restaking offerings across the blockchain network, including swETH.
BitGo may have to make some adjustments in order to keep its position, based on the harsh criticism it has received.
“I think it’s quite a hard pill for the community to swallow, at least in 60 days,” Meow started at the end of the X.
Belshe seemed to be well-aware of the problems.
During that period of time, “we’re going to be working with all of the big DeFi projects that are touching wrapped bitcoin,” “He said” “There’s a community that has to decide whether it wants to do this or doesn’t want to do this.”
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