BitGo Partners with BiT Global Amid Controversy Over Decentralization and Custody

BitGo’s Controversial Alliance with BiT Global

SEOUL, SOUTH KOREA – The recent decision by BitGo to forge a partnership with BiT Global, a cryptocurrency custodian based in Hong Kong and partially owned by Tron’s Justin Sun, has sparked significant debate within the crypto community. Despite the backlash, BitGo’s CEO, Mike Belshe, argues that the criticism lacks intellectual honesty. In an interview with CoinDesk during Korea Blockchain Week, Belshe explained the complexities surrounding this alliance.

One of the most vocal critics of the BitGo-BiT Global collaboration has been Threshold, which recently proposed merging its Bitcoin wrapper, tBTC, into Wrapped Bitcoin (wBTC). They claim that wBTC has seen a concerning shift in control. Belshe responded to this by stating, “They’ve even said publicly that if they had all of Wrapped Bitcoin’s market share, their token’s value would be 35 times higher. I understand that they want their token to appreciate, but we’re encountering hostility from every tBTC holder who wishes to see that happen.” He went on to add, “Let’s be intellectually honest here: criticizing our efforts to decentralize Wrapped Bitcoin solely to boost their token’s value is utterly absurd.”

Regarding Coinbase, which has recently hinted at launching its own competitor to wrapped bitcoin called cbBTC on the Base blockchain, Belshe expressed concerns about the integrity of decentralized finance (DeFi). He stated that if cbBTC were to gain traction, it would undermine the very ethos of DeFi. “If the DeFi community decides to appoint central bank Coinbase as the ultimate steward, then I believe the future of DeFi will be bleak,” he asserted. “Naturally, institutions like Coinbase would love to have Wrapped Bitcoin under their management,” he added. “There’s no question that the model BitGo is proposing—regarding how we store the keys—is vastly superior to anything Coinbase could or would implement.”

Belshe emphasized that many of the most vocal critics fail to grasp the legal framework that BiT Global operates under. As a registered Trust or Company Service Provider (TCSP) in Hong Kong, BiT Global holds a fiduciary duty—similar to BitGo—to the Wrapped Bitcoin DAO to safeguard the bitcoin in its custody. “We are fiduciaries today, and our responsibility is to ensure that the assets are secure, irrespective of their location,” he stated.

So, why pursue this partnership in the first place? Belshe clarified, “The deal is fundamentally about eliminating single points of failure and broadening our presence in Asia.” He elaborated, “We utilize deep cold storage solutions, distributing keys among multiple individuals. Now, we’re advancing this approach by distributing them across various institutions.”

While he recognizes that Justin Sun has a reputation as a “colorful character,” Belshe stressed the necessity of transparency in their dealings. “Most firms wouldn’t even mention his name, but we chose to do so. Why? Because transparency is crucial.” He urged the community to “digest this information, scrutinize it, and propose alternatives,” thereby fostering trust by openly sharing all facets of the partnership.

It appears that this strategy has yielded positive results. Despite initial resistance from certain members of the MakerDAO community, on-chain data indicates that there has not been a significant outflow from wBTC through burns. “It’s not merely about the question of ‘why Sun’; it’s fundamentally about identifying a qualified custodian capable of managing these assets,” he continued.

Ultimately, the qualified custodian happens to be part of Justin Sun’s portfolio, yet it is designed in such a way that he cannot exert control over it.