This is an archive of our post on Aave governance forum. Read the full thread here.

WBTC Community Update - October 1st, 2024

Context and previous posts:

• August 12th, 2024: WBTC Custody Transition: Preliminary Findings and Outstanding Queries

• Sept 18th, 2024: [ARFC] Adjusting WBTC Parameters to Address BitGo Transition Risks

• Sept 19th, 2024: Clarification on ARFC

Community update

Throughout our ongoing meetings with BitGo and BiT Global representatives, we have made significant progress in gathering pertinent information. We are pleased to relay this relevant update to the community.

Following the acquisition of a Trust or Company Service Provider (TCSP) license in early 2024, BiT Global sought legal counsel from a reputable Hong Kong law firm to determine whether holding a TCSP license suffices for BiT Global Trust Limited (BiT Global) to provide custodian services in compliance with Hong Kong laws. Based on their analysis, it was concluded that custodial services fall within the scope of business activities regulated under the TCSP license. Therefore, BiT Global is permitted to offer these services under the TCSP license, which is deemed sufficient for such activities. A thorough examination of this matter is detailed in a legal memorandum that LlamaRisk has assessed; however, we cannot disclose it publicly due to confidentiality restrictions.

It is important to address the condition that applicants for a TCSP license must satisfy the “fit and proper” test for each director and ultimate beneficial owner. This means that individuals must not have been convicted of an offense in Hong Kong or abroad, and corporations must not be in bankruptcy or liquidation. TCSP license holders are subject to strict AML/CTF obligations. Additionally, they are required to appoint an eligible compliance officer to oversee all aspects of their AML/CTF systems and statutory and regulatory compliance, as well as an eligible money laundering reporting officer to review, resolve, and report suspicious transactions.

BiT Global has informed us that they have appointed a Chief Compliance Officer with a proven track record in traditional finance to fulfill the Anti-Money Laundering Ordinance requirements. Under their supervision, this individual and the team are tasked with developing, implementing, and adhering to a robust AML monitoring system.

The TCSP license mandates that the relevant company employ appropriate personnel. According to BiT Global representatives, their staff comes from a cryptocurrency background, with the core team possessing previous experience at various Asia-based crypto exchanges.

As a registered trust company, BiT Global is considered to satisfy certain capital requirements. The company’s issued share capital is not less than HK$3,000,000, and at least HK$3,000,000 of the issued share capital is bona fide fully paid up in cash consideration. The company is also obliged to deposit a sum not less than HK$1,500,000 in the name of the Director of Accounting Services (DAS) with an authorized bank or a finance company. Furthermore, a director’s written confirmation is required to affirm that the company is able to meet its obligations, apart from its liability to its shareholders, without taking into account the sum deposited with the DAS.

A comparative analysis of custodial providers indicates that other renowned businesses offer virtual asset custody services in Hong Kong using entities that hold a TCSP license:

• Zodia Custody - ZODIA CUSTODY (HONG KONG) LIMITED, License No TC009245

• Copper - COPPER MARKETS (HONG KONG) LIMITED, License No TC009486

• OKLink - OKLINK TRUST LIMITED, License No TC007017

• Sinohope - SINOHOPE TRUST COMPANY LIMITED, License No TC007494

• Rakkar - RAKKAR DIGITAL (HONG KONG) LIMITED, License No TC008755

Source: Register of Trust or Company Service Provider Licensees, October 1st, 2024

BiT Global asserts that any changes in the custodian structure must be disclosed in accordance with TCSP regulations. This includes alterations in how custodial services are managed or any ownership structure changes, all subject to mandatory disclosure. Additionally, both BitGo and BiT Global are committed to informing the community of any changes to the agreed-upon plan.

To date, no intent to amend or modify the existing business model has been communicated; consequently, implementing a fee switch is not under consideration at this time.

BiT Global’s representatives have unequivocally expressed their commitment to advancing the growth of WBTC from this point forward without instituting any material changes to the operational model.