Sky mulls cutting support for wBTC over Justin Sun affiliations

Sky (formerly MakerDAO) is considering removing Wrapped Bitcoin from SparkLend due to its ties to Justin Sun.

Sky is considering removing Wrapped Bitcoin (WBTC) as collateral from decentralized finance platform SparkLend, citing concerns over the token’s connections to TRON founder Justin Sun.

On September 12, the Sky team announced a proposal to issue WBTC-A, WBTC-B, WBTC-C, and WBTC from SparkLend, a decentralized non-custodial liquidity protocol, “in several steps,” with the process expected to begin on September 26.

The decision comes after recent developments regarding BitGo and its upcoming partnership with BitGlobal, which is expected to shift WBTC control to a joint venture affiliated with Sun.

In Sky’s forum post, users were advised to close their WBTC Legacy Vaults and positions in SparkLend to avoid a possible liquidation. Concerns were raised about increased counterparty risk associated with Sun’s influence. These issues have also been seen in other projects associated with it, such as the TrueUSD stablecoin.

The debate around WBTC intensified after a proposal from BA Labs highlighted potential risks associated with Sun’s influence. In a forum post on August 10, BA Labs suggested that recent custody changes and past issues with Sun-affiliated products warrant caution.

“Overall, we view Sun’s involvement as a controlling stake in the new WBTC joint venture as presenting an unacceptable level of risk.”

BA Laboratories

BitGo CEO Mike Belshe defended the security protocols in place, stating that the offer to sell WBTC “seems more like a reaction to the name Justin Sun than the truth.”

However, he admitted that the BitGo team was “concerned that some people would react this way.” [Justin Sun’s] “Since we didn’t know his name, we made sure to announce his involvement in advance, even though he didn’t actually have the authority to arbitrarily move any funds.”