Coinbase to Delist Wrapped Bitcoin (WBTC) Amid Growing Controversy

Coinbase has announced it will suspend trading of Wrapped Bitcoin (WBTC) on Dec. 19, 2024, citing unspecified failures to meet its token listing standards. The decision comes amid heightened scrutiny of Bitcoin wrappers and competition within the tokenized BTC market.

Coinbase Ends Market Trading for WBTC

In a Nov. 19 announcement on X (formerly Twitter), Coinbase stated:

“We regularly monitor the assets on our exchange to ensure they meet our listing standards. Based on our most recent review, Coinbase will suspend trading for WBTC on Dec. 19, 2024, on or around 12 pm ET.”

The exchange has already halted market trades of WBTC and now supports transactions solely via limit orders. Once delisting is complete, WBTC trading will be suspended across all Coinbase platforms, including Coinbase.com (Simple and Advanced Trade), Coinbase Exchange, and Coinbase Prime.

What is Wrapped Bitcoin?

Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin that operates on blockchain networks such as Ethereum. Each WBTC is backed 1:1 with Bitcoin, enabling users to access DeFi applications and smart contracts without leaving the Ethereum ecosystem.

Despite its utility, WBTC has faced criticism over its centralized custody model, which requires trust in the entities managing the underlying Bitcoin reserves.

Controversy Surrounding WBTC

The announcement of Coinbase’s delisting has sparked widespread debate within the crypto community. WBTC’s custodial operations recently made headlines when Hong Kong-based exchange BiT Global was granted partial control of the multisignature wallet holding WBTC reserves.

Threshold, a rival Bitcoin wrapper, raised concerns about this arrangement in August, pointing to the involvement of Justin Sun. The organization alleged that Sun’s affiliated projects exhibit “worrying signs of possible misappropriation” of collateralized assets.

Despite these concerns, WBTC remains the most popular Bitcoin wrapper, with over $13 billion in total value locked (TVL), according to DeFiLlama.

Wrapped Bitcoin expressed disappointment over Coinbase’s decision, stating to Cointelegraph:

“We regret and are surprised by Coinbase’s decision to delist WBTC. We have always been committed to providing the community with the most compliant, transparent, and decentralized BTC tokenization product. We urge Coinbase to reconsider this decision and continue supporting WBTC trading.”

Rise of Coinbase Wrapped BTC (cbBTC)

The delisting of WBTC coincides with the growing adoption of Coinbase Wrapped BTC (cbBTC), a competing Bitcoin wrapper launched by Coinbase on Sept. 12, 2024. Despite being relatively new, cbBTC has gained traction, with approximately $1.4 billion in TVL, according to CoinMarketCap.

However, Coinbase has not been immune to criticism. In September, the exchange faced allegations of lagging transparency compared to other Bitcoin wrappers. Unfounded rumors also surfaced, claiming Coinbase issued unbacked Bitcoin IOUs to BlackRock, a major crypto exchange-traded fund (ETF) sponsor.

In response to these challenges, Coinbase confirmed plans to add verifiable proof of reserves for cbBTC by the end of 2024, aiming to bolster confidence in its product.

A Shifting Landscape for Bitcoin Wrappers

The delisting of WBTC underscores a competitive and evolving market for tokenized Bitcoin. With the emergence of cbBTC and ongoing concerns about custodial risks, the landscape for Bitcoin wrappers is rapidly changing.

While Coinbase’s decision signals a shift in focus, it raises questions about the future of WBTC, the role of centralized custodians in DeFi, and the broader implications for tokenized BTC assets.

Stay tuned as we continue to monitor developments in the dynamic world of tokenized Bitcoin and decentralized finance.