MakerDAO stops new WBTC-backed loans following its BitGo concerns

The proposal from MakerDAO contributors to stop new borrowing against BitGo’s wrapped bitcoin (or WBTC) was approved.

MakerDAO governance approved an executive vote that reduces the WBTC debt ceiling to zero DAI — prohibiting any new loans secured by WBTC collateral. In addition, the loan-to-value (LTV) ratio for WBTC was set to 0%. Notably, MakerDAO lets users mint the DAI stablecoin as an overcollaterized loan.

These adjustments do not affect existing loans that are backed by WBTC since the liquidation threshold remains unchanged.

The risk parameter adjustment concerning WBTC came after Bitgo, the developer and custodian of WBTC, announced a partnership with BiT Global (linked to Tron founder Justin Sun) to manage WBTC custody, shifting custody from the U.S. to multiple jurisdictions, including Hong Kong and Singapore.

This development, influenced by Sun’s controversial reputation and the potential centralization of control, had raised security concerns among MakerDAO contributors, resulting in the changes. In defense, BitGo CEO Mike Belshe emphasized the firm’s commitment to security and the legal oversight of BitGo and BiT Global.