Coinbase Faces Backlash for Favoring cBTC

Wrapped Bitcoin’s (wBTC) team has expressed surprise and disappointment at Coinbase’s decision to delist the token. In a statement shared on X, it urged the crypto exchange giant to reconsider this decision and continue supporting the trading of the token.

The team said the token has positioned itself as a decentralized and transparent wrapped BTC product, supported by “innovative mechanisms and rigorous governance.”

They even highlighted their adherence to custody processes, on-chain verifiability, and regulatory compliance, as well as maintaining active communication and cooperation with due diligence processes, including those involving Coinbase.

“We firmly believe that transparency and decentralization are core values of the crypto industry, and wBTC exemplifies these principles. We urge Coinbase to reconsider this decision and continue supporting wBTC trading.”

Coinbase to Suspend wBTC Trading

wBTC’s response comes after Coinbase announced that it would suspend trading for wBTC on December 19th, 2024. In its latest update, the exchange said it moved wBTC order books to limit-only mode, ensuring users can place and cancel orders while allowing token transfers after delisting. Although Coinbase described the decision as part of its routine asset reviews, the lack of transparency has fueled criticism.

Many community members allege Coinbase acted to favor its own tokenized Bitcoin, cbBTC, which allows balance freezing – a feature wBTC does not support. Critics argue the decision undermines competition and claim Coinbase justified it with vague customer protection narratives.

The controversy has also brought renewed attention to wBTC’s structure, with an older statement by BitGo CEO Mike Belshe resurfacing as part of the ongoing debate.

“There is actually no freeze function inside of wBTC’s smart contracts which surprises people because all of the stablecoins actually have the ability to freeze money. At first glance, of course, you’re going to have some sort of a token and (if) it falls into the hands of a bad actor, you want to freeze it.

But remember, as soon as you give someone the power to freeze, do you trust that they will always be using that freeze capability for the best of intentions or the intentions that you agree with?”

Justin Sun’s Grip on wBTC

Wrapped Bitcoin – which happens to be the largest tokenized Bitcoin product – has also attracted its fair share of scrutiny this year. Tron founder Justin Sun has reportedly gained influence over the wBTC protocol after BitGo, its primary custodian, entered a joint venture with BiT Global, a Hong Kong-based trust with ties to Sun.

Historically, BitGo managed custody and the underlying Bitcoin tokens backing wBTC, but in August, it announced a plan to share control with three entities for increased geographical resilience. This strategic shift, involving Sun and the Tron ecosystem, sparked concerns in the crypto industry, prompting responses such as MakerDAO limiting DAI minting with wBTC as collateral and Aave monitoring the situation.