Justin Sun Concerned About Coinbase cbBTC Transparency

Coinbase's launch of its wrapped Bitcoin, cbBTC, on the Base Network, is barely 24 hours old but is already causing some ruckus.

Coinbase recently launched its wrapped Bitcoin (cbBTC) on the Base Network. However, Tron founder Justin Sun has raised several concerns about the new product.

In a series of tweets, Sun highlighted the lack of Proof-of-Reserve (PoR) for cbBTC. He also stated that the wrapped Bitcoin token has not been audited and that anyone's balance could be frozen without notice. According to Sun, cbBTC is essentially a "trust me" system with no 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 added.

To provide some context, cbBTC is a 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. Furthermore, 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. Notably, the launch of this product caused another token, cbBTC, to skyrocket by over 93% to $0.000153.

It is important to note that such shortcomings listed by Justin Sun do not go unnoticed in the crypto industry. 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.

For instance, crypto exchanges like Binance publish 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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