Coinbase faces backlash for favoring cBTC

The Wrapped Bitcoin (wBTC) team has expressed their surprise and disappointment at Coinbase’s decision to withdraw the token. In a statement shared on X, he urged the crypto exchange giant to reconsider this decision and continue to support trading of the token.

The team said the token has been positioned as a decentralized and transparent BTC product, backed by “innovative mechanisms and rigorous governance.”

They even highlighted their adherence to custody, on-chain verifiability and regulatory compliance processes, as well as maintaining active communication and cooperation with due diligence processes, including those involving Coinbase.

“We strongly believe that transparency and decentralization are core values ​​of the crypto industry, and wBTC exemplifies these principles. We urge Coinbase to reconsider this decision and continue to support wBTC trading.”

Coinbase to suspend wBTC trading

wBTC’s response comes after Coinbase announced it would suspend wBTC trading on December 19, 2024. In its latest update, the exchange said it moved wBTC order books to limit-only mode, ensuring that users can place and cancel orders while allowing token transfers after delisting. Although Coinbase described the decision as part of its routine asset reviews, the lack of transparency has fueled criticism.

Many members of the community allege that Coinbase acted to favor its own tokenized Bitcoin, cbBTC, which allows balance freezing, a feature that wBTC does not support. Critics argue the decision undermines competition and claim Coinbase justified it with vague narratives of customer protection.

The controversy has also drawn renewed attention to the structure of wBTC, with an older statement from BitGo CEO Mike Belshe resurfacing as part of the ongoing debate.

“Actually, there is no freeze feature within wBTC smart contracts that surprises people because all stablecoins have the ability to freeze money. At first glance, of course, you will have some kind of token and ( if) falls into the hands of a bad actor, you want to freeze it.

But remember, as soon as you give someone the power to freeze, you trust that they will always use that freezing ability for the best intentions or with intentions you agree with?

Justin Sun’s flu at wBTC

Wrapped Bitcoin, which happens to be the largest tokenized Bitcoin product, has also attracted its fair share of scrutiny this year. Tron founder Justin Sun has gained influence over the wBTC protocol after BitGo, its main custodian, entered into a joint venture with BiT Global, a Hong Kong-based trust with ties to Sun.

Historically, BitGo managed custody and the underlying Bitcoin tokens backing wBTC, but in August, it announced a plan to share control with three entities to increase geographic resilience. This strategic shift, involving Sun and the Tron ecosystem, raised concerns in the crypto industry, prompting responses such as MakerDAO limiting the minting of DAI with wBTC as collateral and Aave monitoring the situation.

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