If fear is contagious, then Wrapped Bitcoin’s (wBTC) custodian, BitGo, has started a pandemic.
In August, BitGo’s planned Bitcoin (BTC) custody overhaul sparked panic among wBTC holders. Now, similar fears are enveloping other Bitcoin wrappers.
They are overblown. Your wBTC is still secure, and safer alternatives are proliferating. Among newly launched Bitcoin wrappers — tokens representing BTC on other blockchains — Coinbase Wrapped BTC (cbBTC) is the best bet.
Flying too close to (Justin) Sun
On Aug. 9, BitGo tipped plans to grant partial control of wBTC’s Bitcoin backing to BiT Global, a Hong Kong crypto exchange. The partnership wasn’t well received.
BiT Global has ties to Justin Sun, the controversial founder of the Tron smart contract platform. He’s been the subject of multiple misconduct allegations, including November fraud charges from United States regulators. Sun also reportedly tried to misappropriate customer funds from Poloniex, a crypto exchange he bought in 2021.
Decentralized finance (DeFi) protocols have scrambled to cut wBTC exposure. On Sept. 19, Sky — previously Maker — voted to completely remove wBTC from its lending platform.
Now, the contagion is spreading. In September, rumors circulated alleging Coinbase was issuing unbacked Bitcoin IOUs to BlackRock, a crypto exchange-traded fund (ETF) sponsor. That triggered yet another bout of wrapper worries, this time over the safety of Coinbase’s cbBTC.
WBTC is the most popular wrapper token. Source: CoinGecko
Overblown anxieties
The Coinbase rumors are unfounded — and thoroughly debunked — but the concerns about BitGo’s BiT Global partnership are valid. They still don’t justify abandoning wBTC.
Sun clearly has BiT Global under his thumb. He may even own a controlling interest in the company, according to reports. However, Sun doesn’t manage the crypto exchange, and he won’t be directly administering wBTC. Even if he did, misappropriating wBTC’s Bitcoin backing would be virtually impossible.
BitGo stores wBTC’s Bitcoin in a multisignature wallet, which requires at least two authorized “signers” to…
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