Bitrabo Editorial
Justin Sun, the co-creator of the Tron blockchain, has raised concerns about cbBTC, a new Bitcoin token launched by Coinbase, a prominent cryptocurrency exchange that adheres to U.S. regulations.
Justin Sun Raises Alarm Over cbBTC
In a message shared on X, Sun highlighted several significant issues related to cbBTC, particularly its centralization, the potential for government seizure, and a lack of transparency.
cbBTC is designed as a wrapped Bitcoin to provide additional options for BTC holders in decentralized finance (DeFi), competing with wBTC. While it presents certain benefits, the crypto community has expressed considerable debate about its transparency and centralization issues.
Sun pointed out that cbBTC lacks a proofing system that platforms like Binance and OKX utilize to ensure users’ assets are not mixed with those of the exchange. He also mentioned that cbBTC’s code hasn’t been deeply audited, potentially leaving it vulnerable to hacks and theft of funds.
One major worry is that Coinbase, under U.S. governance, could freeze cbBTC at any moment. Sun noted that a simple subpoena could lead the government to seize all associated coins.
Recognizing these potential risks, Sun expressed that while innovation is important, cbBTC signifies a “dark day for Bitcoin.” He likened this wrapped Bitcoin to “central bank Bitcoin,” stressing the risks linked to centralization and the possibility of the government suppressing a coin that ideally should be resistant to censorship.
Coinbase’s Goals for DeFi
A responder to Sun’s commentary pointed out that the use of multisignature wallets to manage cbBTC adds to its centralization concerns, suggesting that such tokens might endanger the wider cryptocurrency ecosystem.
Coinbase has yet to officially address these issues. However, in their announcement, they indicated that cbBTC would be launched on Ethereum, adhering to the ERC-20 standard, and also made available on Base, an Ethereum layer-2 platform. Their intention with this token is to promote the adoption of DeFi.
Each cbBTC in circulation will be fully backed (1:1) by Bitcoin in Coinbase’s custody. Nevertheless, access to the token will be restricted to users in select regions, including Brazil, Australia, and the U.S., but excluding New York.