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Kriptoteka > Market > Blockchain > Justin Sun Criticizes Coinbase’s cbBTC as Central Bank Bitcoin
Blockchain

Justin Sun Criticizes Coinbase’s cbBTC as Central Bank Bitcoin

marcel.mihalic@gmail.com
Last updated: September 13, 2024 11:51 am
By marcel.mihalic@gmail.com 6 Min Read
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Justin Sun, the founder of Tron, criticized the new cbBTC launched by Coinbase, calling it a sign of a bleak era for the original cryptocurrency.

Coinbase introduced cbBTC as a solution to the challenges surrounding BitGo’s Wrapped Bitcoin (WBTC). It is compatible with Ethereum and Coinbase’s Base network and can be utilized across various decentralized finance (DeFi) platforms.

Justin Sun Critiques Coinbase’s cbBTC

Justin Sun asserted that cbBTC signifies “a troubling day for Bitcoin,” presenting risks to DeFi due to the centralization issues associated with Coinbase.

“cbBTC does not have Proof of Reserve, lacks audits, and can freeze any user’s balance at any moment. Essentially, it relies on ‘trust me.’ A subpoena from the US government could seize all of your BTC. This is the epitome of central bank Bitcoin. It’s a grim day for BTC,” Sun posted.

It’s not surprising that Justin Sun opposes cbBTC, as it poses a threat to WBTC’s market dominance. This issue follows BitGo’s partnership with BiT Global of Hong Kong, which effectively ties WBTC to Sun. An X user questioned Sun’s concerns, pointing out that similar decentralization risks are present on Sun’s Tron blockchain.

“What distinguishes Tron? You continuously mint WBTC / USDT with no reserves. The Chinese government controls you,” the user remarked.

Read more: What Is Bitcoin? A Guide to the Original Cryptocurrency

Justin Sun’s link to BitGo’s WBTC has stirred controversy due to his previous operational issues and lack of transparency. This has led to a surge of interest in alternatives, such as 21shares’ Bitcoin wrapper, 21BTC. However, Coinbase’s cbBTC now stands as the potential leader in this arena.

“cbBTC was a logical and strategic move for Coinbase. Honestly, I’m surprised they didn’t roll it out years earlier. My predictions: – 0 fees on mint/redeem – 0 fees for withdrawal to Base – Surpasses WBTC in supply within 6 months of launch (unless acquisition falls through),” venture capitalist Dan Elitzer stated recently.

These remarks follow Coinbase’s introduction of its Bitcoin wrapper last Thursday, marketed as an ERC-20 token fully backed by Bitcoin. The token is currently supported on Base and Ethereum, with plans for expansion to additional chains. Coinbase announced cbBTC as part of its ongoing commitment to enhancing economic freedom.

“As the longest-standing and most widely held cryptocurrency, Bitcoin plays a crucial role in introducing users to the crypto space. Coinbase has been enhancing Bitcoin’s utility, initially through the integration of the Lightning Network for instant low-cost transactions, and now with cbBTC. Starting today, millions of Coinbase customers can easily and securely access financial applications within the Ethereum ecosystem using Bitcoin they already possess,” Coinbase shared with BeInCrypto.

According to the announcement, cbBTC will offer access to secure and robust liquidity, allowing users to maximize the utility of their Bitcoin on-chain. Coinbase cautioned users to stay alert for fraudsters pretending to represent cbBTC.

MakerDAO to Vote on Discontinuing WBTC

As reported earlier by BeInCrypto, MakerDAO (now known as Sky) found itself among those dissatisfied with BitGo’s new custody model, which spans multiple jurisdictions and institutions. The DeFi platform is assessing the risks associated with BitGo’s revised WBTC custody approach.

“Maker is considering offboarding WBTC due to the custody changes from BitGo,” shared a DeFi dashboard developer at DefiLlama at the time.

A governance report released on Thursday indicated that Sky intends to vote on eliminating WBTC from its ecosystem, largely due to concerns related to Justin Sun’s association. This choice could significantly affect the DeFi landscape, considering the lender currently has approximately $200 million in loans secured by WBTC.

Recognizing the potential dangers, BA Labs, a DeFi risk management firm and a notable participant in Sky protocol governance, suggested a careful strategy for reducing WBTC exposure from collateral assets. The firm recommended a systematic five-step process, initiating with phase one on September 26, contingent on a vote.

Read more: Wrapped Bitcoin (WBTC) Price Prediction 2024, 2025, 2026, 2027, 2028

BA Labs Proposal For WBTC Off-Boarding, Source
BA Labs Proposal For WBTC Off-Boarding. Source: MakerDAO Governance Forum

If the proposal passes, a variety of wrapped Bitcoin alternatives, including dlcBTC, tBTC, and FBTC, among others, may be introduced to the platform following BA Labs’ recommendations.

Disclaimer

In accordance with the Trust Project guidelines, BeInCrypto is dedicated to providing unbiased, transparent reporting. This article is designed to offer precise and timely information. However, readers should independently verify facts and consult with a professional before making any decisions based on this content. Please be aware that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.

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