“Sky Protocol Votes to Remove Wrapped Bitcoin as Collateral While SEC Settles Charges Against Rari Capital in Landmark DeFi Day”

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TL;DR

• Sky (formerly MakerDAO) ratifies the removal of wrapped Bitcoin (WBTC) as collateral with 88.17% governance approval, citing custodian concerns tied to Justin Sun
• The SEC announces settled charges against DeFi platform Rari Capital and its co-founders for misleading investors and operating as unregistered brokers
• Bitcoin surges past $63,000 following the Federal Reserve’s 50 basis point rate cut — the first reduction in four years
• The global crypto market cap rises 2.78% to surpass $2.14 trillion on renewed risk appetite
• BA Labs, formerly the protocol’s Risk Core Unit, is named stability advisor for the WBTC offboarding process at Sky

Sky Protocol Offboards Wrapped Bitcoin After Governance Vote

Sky, the decentralized lending protocol previously known as MakerDAO, has officially ratified a plan to remove wrapped Bitcoin (WBTC) as collateral from its platform. The three-day governance vote concluded on September 19, 2024, with an overwhelming 88.17% approval from the Sky community. The decision to divest WBTC exposure comes amid growing concerns about the custodianship of BitGo, the entity responsible for managing the Bitcoin backing WBTC tokens, particularly after the announcement that Justin Sun’s Tron ecosystem would take a role in WBTC custody operations.

BA Labs, formerly the protocol’s Risk Core Unit, was named as the stability advisor overseeing the offboarding process. The advisory body had previously recommended removing WBTC as a collateral option, flagging the centralization risks introduced by the change in custodianship structure. Sky’s community governance process, known for its thorough deliberation, moved swiftly given the severity of the concerns — the proposal moved from discussion to ratification in under a week.

The move is significant because WBTC represents one of the largest tokenized Bitcoin assets in DeFi, with hundreds of millions in value locked across various protocols. Sky’s decision could set a precedent for other DeFi platforms that rely on WBTC as collateral. The protocol, which manages billions in total value locked as one of Ethereum’s oldest and most established DeFi platforms, has historically been conservative in its collateral management approach.

SEC Settles With Rari Capital Over Unregistered Broker Charges

In a separate but equally impactful development for the DeFi sector, the U.S. Securities and Exchange Commission announced settled charges against Rari Capital, Inc. and its co-founders — Jai Bhavnani, Jack Lipstone, and David Lucid — for misleading investors and engaging in unregistered broker activity. The charges relate to Rari Capital’s operation of two blockchain-based investment platforms that, at their peak, attracted significant capital from retail investors.

The SEC alleged that Rari Capital told investors that its platforms were decentralized and autonomous when, in reality, the co-founders maintained significant control over fund management and investment decisions. The regulator characterized the platform’s operations as those of an unregistered broker, marking yet another enforcement action against a DeFi protocol that claimed to be fully decentralized. The settlement, announced on September 18 and reverberating through the market on September 19, signals the SEC’s continued focus on DeFi platforms regardless of their “decentralized” labels.

While the specific monetary terms of the settlement were not publicly disclosed, the charges underscore a growing pattern of regulatory scrutiny aimed at DeFi protocols. The Rari Capital case follows a series of similar enforcement actions throughout 2024, as the SEC works to establish that existing securities laws apply equally to decentralized finance platforms as they do to traditional financial institutions.

Fed Rate Cut Fuels Market Optimism

The broader crypto market is surging on the back of the Federal Reserve’s decision to cut interest rates by 50 basis points — the first rate reduction in four years. Bitcoin has climbed above $63,000, gaining approximately 6% in the 24 hours following the announcement. The global cryptocurrency market capitalization has risen 2.78% to surpass $2.14 trillion, as investors rotate back into risk assets following the dovish monetary policy signal.

The rate cut, which brings the benchmark rate down from its 23-year high, has reignited discussions about Bitcoin’s role as a hedge against monetary expansion. Fed members project median benchmark rates to decline to 4.4% by year-end, suggesting further cuts are on the horizon — a scenario that historically favors alternative assets like cryptocurrencies.

Why This Matters

September 19, 2024 represents a pivotal day for DeFi on multiple fronts. Sky’s decision to remove WBTC collateral reflects the sector’s growing sophistication in risk management — protocols are now actively reassessing and acting on counterparty risks rather than passively accepting them. The SEC’s settlement with Rari Capital sends a clear message that regulatory compliance cannot be sidestepped by labeling a platform as “decentralized.” Meanwhile, the Federal Reserve’s aggressive 50 basis point cut injects fresh liquidity into markets, potentially accelerating capital flows into DeFi and broader crypto assets. For investors and builders in the space, these three developments collectively signal both opportunity and responsibility: the macro environment is shifting favorably, but regulatory and operational risks demand heightened vigilance.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk, including the potential for total loss of capital. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.

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