Paul Grewal, who serves as chief legal officer at Coinbase, has spoken to address issues users have raised about cbBTC, their recently launched wrapped Bitcoin product, specifically around the contentious terms of service.
The newly launched token quickly secured its place as the third-largest wrapped Bitcoin product.
A community member from the crypto space took to the platform X, previously known as Twitter, to highlight issues with the user agreement of cbBTC, indicating potential limitations on Bitcoin reimbursement in the event of malice.
Based on the shared user information, it seems that in cases of malicious action or unforeseen scenarios, users might just receive a proportional distribution of remaining Bitcoin, putting the spotlight on financial security and consumer protection.
Worries Remain
In light of rising concerns from users, Paul Grewal clarified on Coinbase's behalf that they plan to fully cover any direct Bitcoin losses, even if caused by malicious activities or unexpected events.
Yet, he emphasized that Coinbase's liability remains limited when users engage in complex or leveraged positions on external exchange platforms.
“It’s a straightforward limitation on liability: we can’t be accountable for more than the Bitcoin loss incurred. This provision also clarifies the nature of the custodial relationship,” Grewal remarked.
Coinbase's wrapped Bitcoin, available in numerous areas except New York, comes at a time when BitGo’s leading wrapped Bitcoin, WBTC, is facing issues linked to Justin Sun, founder of the TRON blockchain.
Bitcoin is Popular
In August, BitGo, responsible for overseeing WBTC, announced a partnership with BitGlobal. This development involves BitGlobal taking major shares and shifting WBTC custody to include Hong Kong and Singapore.
Concerns arose about Justin Sun due to his previous dealings, suggesting potential conflicts of interest, with fears he could steer WBTC minting and management processes and possibly influence market conditions.
BA Labs highlighted potential risks in a proposal to Sky (formerly MakerDAO) involving Sun’s participation with WBTC. The entity referenced past instances, notably his acquisition of TrueUSD in 2023, which allegedly resulted in operational hiccups, leadership exits, and redemption disruptions.
Furthermore, Sun’s association with Huobi, substituting USDT reserves with stUSDT—a project linked to him—also faced accusations of improper asset handling.
In light of community criticism, BitGo reassured its audience that Sun wouldn’t have fund control. Nonetheless, Sky suggested withdrawing WBTC from its DeFi platform SparkLend as collateral, citing Sun’s influence as a serious concern.
According to Sky's proposal, Sun’s involvement raises counterparty risk, a pattern seen with his previous ventures. Sky aims to gradually remove WBTC collateral through a series of executive votes starting on September 26.
Because of ongoing issues with WBTC, Coinbase’s cbBTC experienced a surge in popularity, becoming the third most significant wrapped BTC token soon after its release earlier this month.
The ERC-20 token, maintaining a 1:1 Bitcoin backing via Coinbase custody, empowers users to offer liquidity for Bitcoin within DeFi protocols or employ it as collateral. As per Dune Analytics, its market cap hit $124 million within two weeks of launching.
Currently, the circulating supply of Coinbase Wrapped Bitcoin is 1,969 tokens, distributed 44.7% on Base and 55.3% on Ethereum. Post-launch on these blockchains, Coinbase plans to introduce cbBTC to Solana.
Hassan Ahmed, the Country Director for Singapore at Coinbase, shared during the Solana Breakpoint 2024 event in Singapore about extending cbBTC to the Solana blockchain.
Although Ahmed did not specify the timing for cbBTC's availability on Solana, he highlighted the potential to leverage Solana’s quick transaction capabilities for DeFi activities.
