Aave DAO's Risk Management Units Weigh Treatment of WBTC as BitGo Plans Custody Split

The Aave DAO’s risk management unit Chaos Labs kicked off a governance discussion on how to treat Wrapped Bitcoin (WBTC) as BitGo plans to split custody across multiple jurisdictions.

Aave’s risk management unit Chaos Labs has initiated a discussion among Aave community members regarding the treatment of Wrapped Bitcoin (WBTC) in light of BitGo's plans to split custody across multiple jurisdictions.

In a post on Aave's governance forum, Chaos Labs expressed concerns that issuing a “risk-off” recommendation at this stage would be “premature” and could negatively impact the protocol in the long run.

The unit highlighted the substantial usage of WBTC on Aave, with around $900 million in debt against $2.2 billion in supplied WBTC on Aave V3 on Ethereum, and $90 million in debt against $212.99 million in supplied WBTC on Aave V3 on Arbitrum.

“The existing debt against WBTC generates approximately $6 million in annualized revenues from the reserve factor alone, with demand continuing to grow at a notable pace,” the post noted.

Aave Chan Initiative founder Marc Zeller also addressed concerns around how Aave would treat WBTC following custody changes. In a post on X, Zeller stated that no single entity would unilaterally decide the fate of collateral, especially one as valuable as WBTC.

“wBTC users are legitimate. Aave values its users. I won’t vote to rug anyone overnight,” Zeller said.

“No immediate changes for at least two months. wBTC team and alternatives are welcome to discuss,” he added.

Zeller's comments come after a proposal from MakerDAO’s risk unit BA Labs suggested off-boarding WBTC entirely in light of BitGo’s custody shake up and Tron founder Justin Sun’s involvement with the firm.

According to data from Daistats, around 10% of DAI's token supply is backed by WBTC.

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