MakerDAO , the decentralized autonomous organization behind the DeFi protocol Maker , has approved a proposal to halt new borrowing against BitGo’s wrapped Bitcoin ( WBTC ).

On Aug. 15, MakerDAO announced that it was reducing the maximum amount of debt allowed for all WBTC vaults to zero. This effectively prevents new borrowing from these vaults and lowers WBTC’s loan-to-value (LTV) ratio on SparkLend to 0%.

The protocol outlined the changes, explaining :

“WBTC-A, WBTC-B, and WBTC-C have been removed from the Debt Ceiling Instant Access Module (DC-IAM). The debt ceilings for WBTC-A, WBTC-B, and WBTC-C are now established at 0 DAI.”

MakerDAO clarified that these adjustments will not impact existing borrowing positions within the Maker Protocol's core WBTC vaults and SparkLend.

Etherscan data reveals that two Maker smart contracts are among the top ten largest holders of WBTC, possessing more than 6,600 WBTC tokens, valued at approximately $380 million.

Why MakerDAO removed WBTC

MakerDAO’s decision to remove WBTC is connected to recent community concerns over Tron founder Justin Sun’s involvement with the digital asset.

Last week, BitGo, the developer and custodian of WBTC, announced a partnership involving Sun and BiT Global to manage WBTC custody. This arrangement relocated custody from the United States to multiple locations, including Hong Kong and Singapore.

Following the announcement, several cryptocurrency stakeholders, including MakerDAO contributors, expressed worries about the security of the tokens and Sun’s participation in the project.

However, BitGo CEO Mike Belshe emphasized that Sun has no control over the tokens and assured that the cryptocurrency entrepreneur had no access to the crypto custodian’s asset keys.

Over $30 million WBTC burned

However, these reassurances appear to have had no impact on the confidence of cryptocurrency investors.

On-chain data reveals that cryptocurrency investors were decreasing their holdings of WBTC by burning and redeeming their assets. According to its dashboard , approximately 575 WBTC, valued over $30 million, have been destroyed during the past week, with crypto exchange Crypto.com and Galaxy Digital leading the trend.

Meanwhile, WBTC's competitors, such as tBTC, have witnessed an increase in their holdings. According to the Dune Analytics dashboard , tBTC holders surpassed 1,000 last week, while its total supply reached 3,107.36 tBTC as of press time, equivalent to over $180 million.

Furthermore, Coinbase has suggested the potential launch of its own wrapped Bitcoin product in the near future.