21.co’s Bitcoin wrapper to add Chainlink proof of reserve
2024-09-24

21.co, the parent company of cryptocurrency asset manager 21Shares, announced on Sept. 23 that it is adding Chainlink’s proof of reserve to 21BTC to address potential concerns about the Bitcoin BTCUSD wrapper’s backing. 
Integrating proof of reserves into 21BTC on Ethereum and Solana “protects against malicious minting by embedding cryptographic guarantees that new tokens minted are backed by reserves,” 21.co said. 
The announcement follows a wave of skepticism among cryptocurrency retail investors about the safety of the underlying spot BTC backing Bitcoin wrappers including Wrapped Bitcoin WBTC and Coinbase Wrapped BTC (cbBTC). 
Chainlink proof of reserves automatically audits financial data — including offchain reserve balances — and transmits that information to a blockchain-based smart contract in real-time.
On Aug. 9, BitGo — the cryptocurrency custodian holding WBTC’s Bitcoin backing — agreed to grant BiT Global, a Hong Kong-based crypto exchange, partial control of the multisignature wallet that holds the custodied Bitcoin. 
“This announcement has proven controversial due to the involvement of Justin Sun, with many in the ecosystem, expressing concern over his ‘affiliated projects show worrying signs of possible misappropriation’ of collateral,” Threshold, a rival Bitcoin wrapper, said in August. 
Sky — a decentralized finance (DeFi) protocol formerly known as Maker — opted to drop WBTC from the platform. Coinbase’s cbBTC, which launched Sept. 12, has surged in popularity, emerging as the third-largest wrapped BTC token.
Since then, cbBTC has been subject to speculation about the safety of its BTC backing. This was set off in part by a Sept. 16 filing by asset manager BlackRock asking for quicker BTC withdrawal times. BlackRock uses Coinbase to custody the spot BTC in iShares Bitcoin Trust (IBIT).
On Sept. 22, Coinbase chief legal officer Paul Grewal dispelled rumors that Coinbase did not intend to reimburse cbBTC holders for BTC backing lost to a cybersecurity exploit.
In the United States, regulated custodians and exchange-traded fund (ETF) sponsors — such as Coinbase and BlackRock, respectively — are subject to strict oversight and reporting requirements, including regular third-party audits. 
BlackRock “will show this to institutional clients upon request but [is] not gonna publish to world,” Eric Balchunas, an ETF analyst at Bloomberg Intelligence, said in a Sept. 23 post on the X platform.
“Just know that this is not amateur hour, BlackRock has like 500 ETFs which store the holdings [with] custodians and has been doing this for decades [without] a hitch,” Balchunas said. “This is why them and other ETF issuers are trusted by America’s advisors so much.”