Sky, the decentralized finance ecosystem that recently rebranded from MakerDAO, has issued a public service announcement that it plans to begin fully offboarding Wrapped Bitcoin (WBTC) from its Legacy Vaults and the SparkLend money market following a governance vote, and is urging users to proactively close their WBTC-backed positions to avoid forced liquidations. The move follows a series of risk discussions and governance polls on phasing out WBTC as collateral, driven by concerns over custodial and reputational risk stemming from changes in WBTC’s custody structure at BitGo and the planned transfer of significant control to BitGlobal, an entity linked to Tron founder Justin Sun. Sky governance has already halted new WBTC-backed loans and is now progressing through the final stages of an offboarding plan that will gradually tighten parameters until all WBTC exposure is removed. According to Sky’s governance documentation and ecosystem communications, the offboarding process is structured in phases, culminating in parameter changes that will raise liquidation ratios on WBTC Legacy Vaults and reduce SparkLend’s WBTC liquidation threshold to 0% after the relevant executive vote passes and the protocol delay elapses. This design effectively forces the unwind of any remaining WBTC debt positions over a defined window, with Sky explicitly warning that, in a worst-case scenario, all outstanding WBTC loans could be liquidated over a period of a few weeks. The shift is significant because WBTC has historically been a major collateral asset and revenue source for the Maker/Sky ecosystem and for SparkLend, but Sky’s risk teams and community now prioritize reducing counterparty and contagion risk, including potential reputational fallout if issues arise around Sun-associated custodial structures. For users, the immediate implication is operational: anyone using WBTC in Sky Legacy Vaults or SparkLend needs to monitor the governance votes and parameter changes closely and close or migrate positions ahead of the tightening risk settings.

AI-generated background, compiled from web sources — not editorial content.

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