A MakerDAO community vote resulted in a decision to set the WBTC debt ceiling to zero, prohibiting new loans from being issued using the asset as collateral.
MakerDAO's Decision
The MakerDAO community has decided to set the debt ceiling for Wrapped Bitcoin (WBTC) to zero. This means that no new loans backed by WBTC will be issued. The loan-to-value (LTV) ratio for WBTC has also been set to 0%. This decision comes amid questions about the security of WBTC, as BitGo, the custodian of WBTC, has entered into a new partnership with BiT Global, which has links to Justin Sun. However, this decision does not impact existing WBTC-backed loans. The liquidation threshold for current positions remains unchanged, meaning that there is no immediate threat to existing borrowers.
BitGo Partnership and Its Impact
The MakerDAO community decided to halt new WBTC-backed loans after BitGo announced plans to move WBTC custody from the United States to Singapore and Hong Kong as part of its collaboration with BiT Global. This partnership raised concerns due to the controversies involving Sun and the possibility of controlling WBTC custody.
Stability and Security in DeFi
This decision by MakerDAO aims to mitigate risks in the decentralized finance (DeFi) ecosystem. By implementing this new debt ceiling, MakerDAO seeks to protect its community from potential threats posed by changes in WBTC custody. Concurrently, Grayscale Investments announced the launch of the Grayscale MakerDAO Trust, allowing investors to invest in MakerDAO’s governance token, MKR. This move highlights the growing interest of institutional investors in DeFi assets.
MakerDAO's decision to set the WBTC debt ceiling to zero underlines its commitment to ensuring the stability and security of its ecosystem. Despite concerns raised by the BitGo and BiT Global partnership, existing loans remain unaffected, providing reassurance to borrowers.
Comments