Coinbase Wrapped BTC (cbBTC)
Coinbase Wrapped BTC (cbBTC) is a wrapped Bitcoin token issued by Coinbase that maintains a 1:1 backing with Bitcoin (BTC) held in secure custody. This digital asset enables users to utilize their Bitcoin holdings in decentralized finance (DeFi) applications while maintaining the ability to redeem the underlying BTC through Coinbase. [1] [2]
Overview
cbBTC is a wrapped Bitcoin token issued by Coinbase, backed 1:1 by BTC held in custody, including cold storage. It allows users to convert BTC into a transferable token that can be redeemed for the underlying asset by depositing it into their Coinbase accounts. Designed for compatibility with DeFi applications, cbBTC enables users to provide liquidity, use it as collateral for borrowing, or utilize it for payments. Wrapped assets like cbBTC increase liquidity and expand onchain financial use cases.
cbBTC maintains a 1:1 backing with BTC through a minting and burning process that ensures supply matches reserves. When users withdraw BTC from Coinbase to Ethereum, Base, or Solana, an equivalent amount of cbBTC is minted and sent to their wallet. When cbBTC is deposited back into a Coinbase address, it is burned, and the corresponding BTC is released to the user’s Bitcoin account.
This process is managed on EVM chains through audited smart contracts that regulate minting and burning. The smart contract structure is based on Coinbase’s wrapped token framework, which is also used for cbETH. It is open-source on GitHub. Key contract management roles include administrators, minters, and security functions, requiring multi-party approval. On Solana, cbBTC operates as an SPL token with similar controls over minting, freezing, and updating metadata. [3] [4]
Security & Compliance
Coinbase secures the BTC backing cbBTC through wallet infrastructure, regular audits, and monitoring systems. Smart contracts involved in the minting and redemption process undergo third-party security audits, including by OpenZeppelin. The contract framework used for cbBTC is based on the audited cbETH Solidity contract, with no material changes.
The BTC reserves backing cbBTC are held 1:1 at Coinbase, with redemption rights assigned to cbBTC holders. Custodial services follow Coinbase’s user agreement and utilize hot and cold wallets. Cold wallet private keys are stored in encrypted, secured facilities in the U.S. and Europe and require multi-party authorization for access. Internal audits verify private key management, and Coinbase does not use sub-custodians for asset storage.
cbBTC operates within regulatory frameworks, adhering to Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. Coinbase holds licenses for crypto custody and trading across multiple jurisdictions, including the U.S., Germany, Singapore, Canada, and Bermuda, and is registered as a Virtual Asset Service Provider in several countries. [4]
Bit Global Sues Coinbase
In a recent legal case, Coinbase has been sued by Bit Global, a company linked to Justin Sun, over the delisting of Wrapped Bitcoin (WBTC). Bit Global alleges that Coinbase's decision to delist WBTC was strategically aimed at promoting its own wrapped Bitcoin product, cbBTC. This lawsuit highlights the competitive tensions in the cryptocurrency market, where exchanges and platforms vie for dominance in offering wrapped token solutions. The case underscores the complexities and competitive nature of the crypto industry, particularly in the realm of wrapped assets, which are crucial for enabling liquidity and DeFi applications.
According to the lawsuit filed on December 13, 2024, in the U.S. District Court for the Northern District of California, BiT Global Digital Limited accuses Coinbase of anti-competitive behavior for delisting wBTC shortly after announcing cbBTC. BiT Global claims this move effectively prevents competition and forces users to adopt cbBTC, violating federal and state laws. The complaint emphasizes Coinbase's market dominance and alleges a strategy to replace competitors' cryptocurrencies with its own versions, starting with wBTC.
BiT Global also suggests that Coinbase is subsidizing its Ethereum Layer 2 network, Base, to boost cbBTC adoption by reducing or eliminating fees, a practice they believe will cease once competition is diminished. The company is seeking a judgment against Coinbase's actions, demanding financial penalties, including punitive damages exceeding one billion dollars to reflect wBTC's loss in value, and the disgorgement of profits derived from these business practices.
Coinbase's official statement claimed that wBTC no longer meets its listing standards, but BiT Global argues that no specific issues were raised prior to the delisting announcement and that Coinbase has virtually no standards, pointing to the listing of memecoins like PEPE, Dogwifhat, and Mog Coin. The delisting of wBTC has raised concerns about the precedent it sets for the cryptocurrency space, particularly regarding the ability of large exchanges to delist cryptocurrencies in favor of their own products.
The context of this lawsuit also involves Justin Sun's connection to BiT Global and the concerns surrounding his involvement in the cryptocurrency space, including allegations of market manipulation and the use of the TRON blockchain by Islamic terror groups. These factors add complexity to the legal battle and highlight the broader regulatory and ethical considerations in the cryptocurrency industry. [1] [6] [7] [8]
Expansion to Solana and DeFi Integrations
Coinbase has expanded its wrapped Bitcoin product, cbBTC, to the Solana blockchain, enhancing its integration with decentralized finance (DeFi) applications. This move allows cbBTC to be utilized within Solana's rapidly growing DeFi ecosystem, offering users the ability to engage in various financial activities such as lending, borrowing, and trading with lower transaction costs and faster processing times compared to other blockchains.
The integration of cbBTC on Solana is part of Coinbase's broader strategy to increase the utility and accessibility of its wrapped Bitcoin product across multiple blockchain platforms. By leveraging Solana's high throughput and low latency, Coinbase aims to provide a more efficient and scalable solution for users looking to utilize Bitcoin in DeFi applications.
Additionally, cbBTC is now available on Coinbase's own Layer 2 network, Base, as well as on Ethereum, further broadening its reach and functionality. These integrations are designed to offer users more flexibility and options for using Bitcoin in a decentralized manner, aligning with the growing demand for cross-chain compatibility and interoperability in the cryptocurrency space.
The launch of cbBTC on these platforms underscores Coinbase's commitment to expanding its DeFi offerings and enhancing the overall user experience by providing seamless access to Bitcoin-backed assets across different blockchain networks. [9] [10] [11] [12] [15]