DeFi Giant Sky Plans Vote to Sell Wrapped Bitcoin Over Justin Sun Worries

Sky, a major player in the DeFi lending world, is proposing a vote to sell its Wrapped Bitcoin holdings. This decision comes amid concerns surrounding Justin Sun. If the proposal is approved, it could impact $200 million worth of loans in Sky's ecosystem, potentially reshaping the platform's financial landscape.

DeFi Lending Giant Sky Proposes Vote to Divest Wrapped Bitcoin Amid Ongoing Justin Sun Concerns

Sky, formerly recognized as MakerDAO, has announced an upcoming vote to entirely eliminate wrapped Bitcoin (wBTC) from its ecosystem, according to a Thursday governance update. This move could have a major impact, as wBTC currently backs $200 million in loans on the platform.

Wrapped Bitcoin (wBTC) allows Bitcoin (BTC) to be used on other blockchains and is a key asset in DeFi lending, with a market cap of $9 billion.

BA Labs, a key DeFi risk management firm involved in Sky protocol's governance, previously recommended lowering exposure to wrapped Bitcoin (wBTC) due to concerns over Tron founder Justin Sun's connection with the custodian managing the underlying assets. Given Sky's status as one of the largest DeFi platforms and the issuer of the $5 billion DAI stablecoin, the proposal has attracted considerable attention from blockchain analysts and the wider crypto community.

On Thursday, BA Labs introduced a new proposal to completely phase out wBTC from Sky's collateral pool in a five-step process, starting on September 26. Each phase will be subject to a separate vote.

BA Labs stated in its proposal, "Legal due diligence does not provide sufficient assurance in this matter."

Sky's $200 Million wBTC Exposure and Recent Custody Controversies

Currently, Sky’s SparkLend platform has around $73 million in loans secured by wrapped Bitcoin (wBTC), while Sky's legacy vaults hold approximately $127 million in debt backed by wBTC, as detailed in a BA Labs update.

Recent tensions surrounding wBTC arose after BitGo revealed it plans to shift control of the asset to a new joint venture with the custody firm BiT Global. This announcement has sparked competition from alternative wrapped Bitcoin versions like dlcBTC, Threshold’s tBTC, and FBTC, which is supported by Mantle Network.

The new arrangement distributes custody control among three global entities rather than a single one, aiming to enhance decentralization. As noted in a press release from August 9, BiT Global is a regulated custody platform based in Hong Kong and operates under the Trust and Company Service Provider (TCSP) framework. It is a strategic alliance involving BitGo, Justin Sun, and the Tron ecosystem.

Earlier this month, BitGo CEO Mike Belshe emphasized that the new joint venture operates independently from Sun and the Tron network.