Coinbase Can Delist Wrapped Bitcoin Amid BiT Global Challenge, Judge Rules

A federal judge denied BiT Global’s request for a temporary restraining order Wednesday, finding that the Hong Kong-based firm failed to show an imminent and irreparable harm that would come 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 the exchange’s plans to delist WBTC Thursday, while promoting its own version of wrapped Bitcoin, amounted to unfair business practices. As a custodian for WBTC reserves alongside BitGo, BiT Global sought a judgement 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 “unacceptable risk that control of WBTC would fall into the hands of Justin Sun,” the co-founder of Tron, a layer-1 blockchain. 

While he vigorously denies the allegations, Sun was accused of fraud and market manipulation in an SEC lawsuit brought last year. When Coinbase launched its wrapped Bitcoin product, dubbed cbBTC, in September, Sun skewered the product, calling it “central bank Bitcoin” and a “dark day for BTC.”

Sun serves as an advisor to BiT Global, Robert Liu, a board member at BiT Global, told CoinDesk in an October interview. That same month, Liu told Decrypt that Sun also acts as a “major financial supporter” of WBTC’s revamped custody setup.

During the hearing, Judge Martínez-Olguín asked BiT Global’s counsel 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’s supply immediately followed Coinbase’s delisting announcement.

Coinbase’s attorney, WilmerHale Partner Sonal Mehta, countered that WBTC’s trading volume on Coinbase constitutes less than 1% of WBTC’s overall trading, which could not result in “lost sales.” She also said WBTC’s supply was already dropping before Coinbase’s delisting move.

“This case is about Coinbase being allowed to do what it needs to do to protect its platform,” she said. “It’s not about monopolies. It’s not about antitrust claims.”

Wrapped Bitcoin, whether it’s issued by Coinbase or BitGo and BiT Global, is commonly used in decentralized finance, or DeFi. Backed 1:1 with Bitcoin reserves, the products enable users to effectively use Bitcoin in lending, borrowing, and trading via decentralized applications.

BitGo said that it was teaming up with BiT Global in August, using the Hong Kong-based firm to diversify WBTC’s backing in a multi-jurisdictional way. While BitGo is based in the U.S., the company also set up an entity in Singapore following community feedback.

BitGo, BitGo Singapore, and Bit Global all hold one private key—two of which are needed, under WBTC’s current custody setup, for minting and destroying WBTC.

Since Coinbase launched cbBTC, the token’s circulating supply has reached 20,700, giving the asset a $2.1 billion market cap, 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 Coinbase-launched Ethereum scaling solution Base.

In an interview with Decrypt, BiT Global’s Liu claimed Tuesday that Coinbase delisted WBTC following a single email exchange, in which the Hong Kong-based firm responded to a “generic inquiry” about WBTC’s revamped custodial setup—and never heard back.

Responding to BiT Global’s lawsuit later that day, an exhibit attached to Coinbase’s filing suggested otherwise. A member of Coinbase’s listings team made specific inquiries about WBTC, BiT Global, and Sun across multiple emails, according to Coinbase’s filing.

In an email sent Oct. 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 backing. As part of a dashboard on WBTC’s website, the information has since been removed as WBTC’s viability on Tron is reassessed, Liu said.

Currently, there aren’t many DeFi projects that can leverage WBTC on Tron, Liu said. He attributed the dearth of projects to a lack of compatibility between Tron and Ethereum, making it difficult for developers to port their existing projects over to Tron’s network.

“Before we are able to really solve the cross-chain deployment bottleneck, there's no real market demand for [Tron-based] WBTC,” Liu said. “So we decided to basically off-board that.”

Liu said that BiT Global’s headcount has grown to 30 in Hong Kong, and despite the scrutiny that WBTC has weathered, the project has been able to expand its roster of institutional merchants, which help distribute WBTC to users as administrators. Still, he described dismay over the increasing surge of scrutiny pointed 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 [at them] simply for one reason: to destroy them.”

Edited by Andrew Hayward