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In summary
- A federal judge denied BiT Global the injunction against Coinbase for the delisting of WBTC.
- Coinbase justified the delisting due to control risks associated with Justin Sun and WBTC.
- BiT Global faced scrutiny over its relationship with WBTC and its custody setup.
A federal judge on Wednesday denied BiT Global’s request for an injunction, ruling that the Hong Kong-based firm failed to demonstrate imminent and irreparable harm that would result from Coinbase’s plans to soon delist WBTC, or Wrapped Bitcoin.
“Ultimately, I have no evidence from you about what is to come,” U.S. District Judge Araceli Martínez-Olguín told BiT Global’s attorney. “I will not stop Coinbase from delisting WBTC.”
BiT Global sued Coinbase last week, alleging that the exchange’s plans to delist WBTC this Thursday, while promoting its own version of wrapped Bitcoin, amounted to unfair business practices. As custodian of WBTC reserves alongside BitGo, BiT Global sought a ruling prohibiting Coinbase from delisting the $14 billion product from its exchange.
Responding to BiT Global’s lawsuit earlier this week, Coinbase said its decision to delist WBTC was motivated by an “unacceptable risk of control of WBTC falling into the hands of Justin Sun,” the co-founder of Tron, a Cryptocurrency Blockchain. layer 1.
While Sun strongly denies the allegations, he was accused of fraud and market manipulation in a U.S. Securities and Exchange Commission (SEC) lawsuit filed last year. When Coinbase launched its wrapped Bitcoin product, called cbBTC, in September, Sun criticized the product, calling it “central bank Bitcoin” and a “dark day for BTC.”
Sun works as an advisor to BiT Global, BiT Global board member Robert Liu told CoinDesk in an interview in October. That same month, Liu told Decrypt that Sun also acts as a “major financial backer” of WBTC’s revamped custody setup.
During the hearing, Judge Martínez-Olguín asked BiT Global’s lawyer how a loss of profits could be considered irreparable harm, as BiT Global had alleged. Kneupper & Covey partner Cyclone Covey responded by saying that a 5% drop in WBTC supply immediately followed Coinbase’s delisting announcement.
Coinbase attorney Sonal Mehta, a partner at WilmerHale, responded that WBTC trading volume on Coinbase constitutes less than 1% of total WBTC trading, which could not result in “lost sales.” He also said that WBTC supply was already falling before Coinbase’s delisting announcement.
“This case is about allowing Coinbase to do what it needs to do to protect its platform,” he said. “It’s not about monopolies. It’s not about antitrust claims.”
Wrapped Bitcoin, whether issued by Coinbase or BitGo and BiT Global, is commonly used in decentralized finance, or DeFi. Backed 1:1 with Bitcoin reserves, the products allow users to effectively use Bitcoin in lending, borrowing and trading through decentralized applications.
BitGo said it partnered with BiT Global in August, using the Hong Kong-based firm to diversify WBTC support on a multi-jurisdictional basis. While BitGo is based in the US, the company also established an entity in Singapore following community feedback.
BitGo, BitGo Singapore, and Bit Global each maintain a private key—two of them are needed, under the current WBTC escrow setup, to mint or destroy WBTC.
Since Coinbase launched cbBTC, the circulating supply of the token has reached 20,700, giving the asset a market capitalization of $2.1 billion, according to data from CoinGecko. Last month, Coinbase announced that its cbBTC product would be added to Solana after first launching on Ethereum and the Ethereum Base scaling solution launched by Coinbase.
In an interview with Decrypt, BiT Global’s Liu claimed on Tuesday that Coinbase delisted WBTC after a single email exchange, in which the Hong Kong-based firm responded to a “generic query” about WBTC’s revamped custody setup. WBTC—and never heard back.
Responding to BiT Global’s lawsuit that same day, a document attached to Coinbase’s filing suggested otherwise. A member of Coinbase’s listings team made specific inquiries about WBTC, BiT Global and Sun through multiple emails, according to Coinbase’s filing.
In an email sent on October 24, a BiT Global representative pointed to so-called collateral records for a version of WBTC issued on Tron, addressing questions about the token’s endorsement. As part of a panel on WBTC’s website, the information has been removed while the viability of WBTC on Tron is re-evaluated, Liu said.
Currently, there are not many DeFi projects that can leverage WBTC on Tron, Liu said. He attributed the project shortage to a lack of compatibility between Tron and Ethereum, making it difficult for developers to port their existing projects to the Tron network.
“Before we can really solve the cross-chain deployment bottleneck, there is no real market demand for WBTC (based on Tron),” Liu said. “So we decided to basically discontinue it.”
Liu said that BiT Global’s staff has grown to 30 people in Hong Kong, and despite the scrutiny that WBTC has endured, the project has been able to expand its list of institutional traders, who help distribute WBTC to users as administrators. However, he described his dismay at the increasing scrutiny directed at BiT Global and WBTC.
“It’s shocking,” Liu said. “People seem to have a crusade against a certain individual target, and they go relentlessly (against them) for simply one reason: to destroy them.”
Edited by Andrew Hayward
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