Sky, previously known as MakerDAO, has officially passed a governance vote to remove Wrapped Bitcoin (WBTC) from its lending and borrowing ecosystem.

The vote, which concluded on September 19, saw overwhelming community support following rising concerns about WBTC's custodianship and potential ties to controversial blockchain entrepreneur Justin Sun.

According to Sky's official website, nearly 90% of the governance community voted in favor of the proposal to remove WBTC as collateral. Out of the total votes cast, 95,826 MKR tokens** were in support, while 11.83%** of participants abstained, and no opposition votes were recorded. The decision marks a critical turning point for the platform's forward strategy.

Key Concerns over WBTC's Custodianship

The move to remove WBTC from Sky's lending pool stems from concerns raised by its advisors at BA Labs. In August, the team flagged potential risks surrounding WBTC's ownership and control, which was speculated to involve Justin Sun or his affiliates.

The company expressed worries that Sun's track record in the blockchain industry could pose "significant counterparty risks" for the decentralized finance (DeFi) platform, urging a reassessment of WBTC's role in Sky's ecosystem.

BitGo, the custodian of WBTC, disclosed in August that it sought to transition control of the asset to a joint operation with BitGlobal, an entity closely linked to Justin Sun. The collaboration, with regulated operations based in Hong Kong, sparked concerns given Sun's controversial standing in the crypto world.

As a result, BA Labs recommended removing WBTC from Sky's platforms. On September 12, Sky's team acted on these concerns by initiating a proposal to offboard WBTC from both its SparkLend platform and Legacy Vaults, seeking to mitigate the risks associated with Sun's involvement.

Exploring Alternative Wrapped Bitcoin Solutions

Despite Sun's assurances, Sky's community pushed ahead with plans to decouple from WBTC. By making this decision, Sky is reinforcing its commitment to safeguarding its ecosystem from potential risks and external threats.

With WBTC being phased out, the protocol explores alternative wrapped Bitcoin solutions. In a proposal floated earlier in September, Sky listed Coinbase's cbBTC and Threshold's tBTC as potential substitutes for WBTC within its lending and borrowing markets.

Proponents argue that these alternatives provide a safer and more transparent framework for DeFi collateral use.

More DeFi Protocols to Follow Sky's Move

Meanwhile, Sky is one of many DeFi protocols distancing itself from WBTC. LlamaRisk recently proposed to reduce WBTC's loan-to-value (LTV) ratio to zero in the AAVE community, citing concerns over BitGo's custody transfer of the asset.

However, Aave's founder, Stani Kulechov, later clarified that this was only a proposal from a risk provider and not a decision by Aave itself to offboard WBTC.

"By moving forward with this decision, Sky is reinforcing its commitment to safeguarding its ecosystem from potential risks and external threats."

Sky's move to remove WBTC and explore alternative wrapped Bitcoin solutions marks a significant development in the DeFi landscape.

As more protocols consider similar actions, the industry will likely shift towards more secure and transparent collateral frameworks.