Coinbase’s launch of its wrapped Bitcoin, cbBTC, on the Base Network, is barely 24 hours old but is already causing some ruckus. Tron founder Justin Sun has a long list of concerns about the new product and has taken X to voice some of them. Some followers seem to agree with his stance on the Coinbase cbBTC.
Justin Sun Concerned About cbBTC Transparency
Justin Sun has highlighted the lack of Proof-of-Reserve (PoR) for the Coinbase product. According to the Tron founder, cbBTC also has no audits and is likely to freeze anyone’s balance without prior notice. He says it is essentially a “trust me” system without evidence to promote accountability.
“Any U.S. government subpoena could seize all your BTC. There’s no better representation of central bank Bitcoin than this. It’s a dark day for BTC,” Sun noted.
For a background into the cryptocurrency that is raising concerns, American cryptocurrency exchange Coinbase launched cbBTC on Base, bringing some Bitcoin to the Layer-2 network. In the exchange’s announcement, it stated that the wrapped BTC token will be supported on both the L2 network and Ethereum. Additionally, the ERC20 token will be backed 1:1 by the Bitcoin (BTC ) held by the crypto exchange.
Coinbase also outlined how cbBTC will give BTC holders more economic freedom in how they use their holdings. The exchange plans to make the wrapped Bitcoin available on platforms like Compound, Morpho, Moonwell, and Spark. The launch of this product forced cbBTC token, an unrelated asset to skyrocket by over 93% to $0.000153.
Purpose of Proof-of-Reserve
In the crypto industry, it is worth noting that such shortcomings listed by Justin Sun do not go unnoticed. They became crucial after Terra/LUNA crashed in 2022 and when Bahamian-headquartered crypto exchange FTX imploded in the same year.
Over time, PoR reports have become necessary to ensure a protocol’s transparency and financial health status.
Crypto exchanges like Binance publishes PoR regularly. Only a few days ago, the leading digital asset service provider released its 22nd PoR report. This report showed that the exchange’s BTC holding ratio in comparison to the user balance stands at 106.84%.
The exchange users’ Ethereum holdings per the PoR comes in at 4,486,359.895 ETH. The ETH holding ratio is also at 103.68%. With the Justin Sun allegation, it remains unclear whether Coinbase will also release the cbBTC PoR later.
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