Sky, the rebranded MakerDAO, has concluded a governance vote on September 19, leading to the decision to eliminate Wrapped Bitcoin (WBTC) as a borrowing collateral option.
BA Labs, previously known as the Risk Core Unit, has been appointed as the stability advisor for this transition. They were the ones who recommended the removal of WBTC from the collateral list.
Starting October 3, SparkLend, part of the Sky ecosystem, will begin implementing a gradual reduction in collateral caps for WBTC. Furthermore, measures including a lowered liquidation threshold and increased linear interpolation will be enacted to deter users from engaging with WBTC vaults.
The timeline for this initiative is outlined in a proposal that suggests the overall process will conclude by November 14, although delays are possible.
According to SparkLend’s dashboard, WBTC currently backs $61.2 million in debt on their platform, predominantly in the form of DAI, which is a native stablecoin in the Sky ecosystem.
Among the 108,689 Maker (MKR) tokens cast in this voting, a significant majority of 95,826 MKR (88.1%) supported the wind-down strategy. The voting also yielded 12,863 MKR (11.8%) in abstentions, with no opposing votes.
Concerns Arising from WBTC Changes
BA Labs’ recommendations in Sky’s governance coincided with BitGo’s announcement regarding a multi-jurisdictional custody model, aimed at boosting its global expansion. This strategy involves a joint venture with BiT Global, which will take direct control of WBTC.
This shift has sparked various concerns within the industry, particularly following the withdrawal of 12,000 BTC from USDD’s reserves—an action also addressed in the BA Labs’ proposal. USDD is a stablecoin associated with the TRON ecosystem.
Mike Belshe, BitGo’s CEO, actively resisted the idea of WBTC being removed as collateral on SparkLend, arguing that this change could disadvantage users lacking sufficient stablecoin reserves to withdraw their WBTC from the platform.
Despite Belshe’s appeals, voters remained unmoved, resulting in the removal of WBTC from SparkLend’s collateral options.
Additionally, Aave is reevaluating the viability of WBTC as collateral, considering a September 18 proposal from LlamaRisk that advocates for a reduction of the loan-to-value ratio for WBTC vaults to zero, as well as lowering borrowing and supply caps.
Both Sky and Aave are on the lookout for alternative collateral options, including cbBTC from Coinbase and tBTC from Threshold.