Justin Sun, the co-founder of Tron, a smart contracts platform and one of many blockchains competing with Ethereum, has an issue with the recently launched cbBTC, a wrapped Bitcoin token by Coinbase, a top crypto exchange complying with United States laws.
Justin Sun Of Tron Picks Out Issues With cbBTC
In a post on X, Sun picked out several glaring concerns, especially those revolving around its centralization, risks of seizure by the government, and its opaque nature.
Technically, cbBTC will serve as a wrapped Bitcoin and yet another token to take on wBTC, which aims to allow BTC holders to engage in DeFi. However, while positive, the perceived absence of transparency and centralizing could explain the raging debate across the crypto community.
Sun argues that cbBTC doesn’t have a proofing system used by top exchanges like Binance and OKX, for example, to assure holders that their assets are not being commingled with those of the exchange. Additionally, the co-founder said cbBTC’s code has not undergone thorough audits, which means it could be at risk of being hacked and funds stolen.
A major concern, however, is that Coinbase, the issuer directed by the United States government, can order cbBTC to be frozen at any time. Sun said a simple subpoena is needed for the government to seize all coins.
In light of these risks, Sun acknowledges innovation and thinks cbBTC marks a “dark day for Bitcoin.” The co-founder also compared the wrapped Bitcoin to a “central bank Bitcoin,” further emphasizing the dangers of centralization and the real risk of the government freezing a coin that is, in its pure form, censorship-resistant.
Coinbase Wants To Drive DeFi
Another chimed in, noting that the use of multisig wallets, which are inherently centralized, to secure cbBTC effectively means there is a level of centralization. For this reason, the commentator, replying to Sun’s concerns, thinks cbBTC and similar tokens pose a risk to the broader crypto ecosystem.
Coinbase is yet to respond to these criticisms. However, in their announcement, the exchange said cbBTC will be issued on Ethereum, complying with the ERC-20 standard. The wrapped Bitcoin will also be available on Base, an Ethereum layer-2. Through this token, their goal will be to drive DeFi adoption.
Each cbBTC in circulation will be backed 1:1 by BTC held in their custody. Even so, the token will only be accessible to, among other users, those in Brazil, Australia, and the United States–excluding New York.
Feature image from Flickr (Oberazzi), chart from TradingView
