DeFi Lending Giant Sky Wants to Remove Wrapped Bitcoins from Its Ecosystem

Decentralized finance lender Sky, formerly known as MakerDAO, will vote to completely remove wrapped bitcoins (wBTC) from its ecosystem.

DeFi risk management firm BA Labs, an influential voice in the governance of the Sky protocol, had previously suggested reducing the use of wBTC due to risks stemming from Tron founder Justin Sun’s relationship with the custodian for the underlying assets. Sky, one of the largest DeFi projects, is the issuer of the $5 billion decentralized stablecoin DAI, so the development is being closely followed by crypto analysts and blockchain industry observers.

BA Labs announced yesterday that it proposes to gradually remove all wBTC exposure from collateral assets in five steps. Each step will be put to a vote, the first of which will begin on September 26.

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“We find that legal due diligence will not provide a sufficient level of assurance,” BA Labs said in its proposal.

BA Labs recommends including alternative products on the platform if the bid passes.

A Tron spokesperson has not yet returned CoinDesk’s request for comment.

According to BA Labs’ post, there are approximately $73 million worth of loans collateralized with wBTC on Sky’s affiliated lending platform SparkLend and approximately $127 million worth of debt in Sky’s legacy vaults.

Tensions over wBTC flared after crypto custody firm BitGo announced earlier this month that it planned to transition control of the asset into a joint operation with a custody platform called BiT Global.

It was emphasized that the agreement, which distributes control over the project’s oversight to three organizations, is important in terms of continuing activities in a decentralized manner.

BiT Global is a global custody platform headquartered in Hong Kong, registered as a Trust and Company Service Provider (TCSP), and is a “strategic partnership between BitGo, Justin Sun, and the Tron ecosystem,” according to an August 9 press release.

BitGo CEO Mike Belshe defended the joint firm’s autonomy from Sun and Tron earlier this month.